Great Wall Becomes Reality Check on Chinese Auto Brands

Chinese auto manufacturer, Great Wall Motor co., was loved by investors a year ago. However, the stock of the company that specializes in producing cheap SUV’s has taken huge hits since its rise to prominence last year. In 2013 the stock surged to record heights and the chairman of the company even made claims that it would outsell Jeep. However the company’s new Haval H8, Great Wall’s first sports utility vehicle, had production suspended indefinitely last week because of quality concerns. This is the second time the production has been delayed this year. The announcement caused a 17% drop in stock prices, the biggest drop in the stock since 2008. Analysts look at the company’s recent shortcomings as proof that China’s auto industry isn’t far enough developed to produce cars that can compete with foreign auto manufacturers.

The first recall of the H8 was due to customers hearing a strange knocking noise in the transmission system when driving at high speeds. Sales and production were halted by the Great Wall Motor co. in order to fix the kinks and many analysts believed the recalls, “reflected the company’s deficiencies in research and development in as well as technical management of high-end products.” On top of that, Great Wall had to conduct a second recall when it was discovered parts of their automobiles were produced in factories containing asbestos, which really caused the stock to fall.

Great Wall Motor co.’s overseas sales fell 22% last year, while last month alone the automaker’s sales fell 11%. Although it remains the most popular SUV line in China, Great Wall’s lofty goals of outselling Jeep do not seem realistic. The company was too aggressive jumping into producing a premium vehicle like the V8, when it should have stayed producing cheaper SUV’s like its last model, the H6. The Chinese car company has to invest a lot of capital into research as well as fixing its production facilities until it can truly compete in global automobile market.

Source- http://www.bloomberg.com/news/2014-05-11/great-wall-becomes-reality-check-on-chinese-auto-brands.html

5 comments to Great Wall Becomes Reality Check on Chinese Auto Brands

  • mayolj16

    We learnt with Toyota that when we look at the past we see some car manufacturers starting with smaller vehicles and then start making them bigger to meet consumer requests. Sometimes this could be risky as the company might forget what made them have a great success; in this case the cheap SUVs. When trying to expand into a larger model they started to have some issues. I just checked their webpage an it seems that they are not selling the H8 any more; maybe they learnt their lesson.

  • Kade Kenlon

    It seems the company was over zealous and thought they could compete immediately with the likes of Jeep. With early success, as Great Wall Motor Co. experienced, it is easy to become to confident and think the company could produce a V8 SUV in a short amount of time. They misinterpreted their success in the beginning, thinking that it meant their company could compete with Jeep, when really they had produced a cheap car the was serviceable enough for the public and it earned them decent revenue.

  • Jier Qiu

    I agree with Kade. Great Wall is pushing into global market way too fast despite it still has a lot of shortcomings in R&D. However, I am still quite confident about their success in the future. Technical probelms will be corrected overtime when auto parts can be bought all over the world. Great Wall is not the pioneer in the V8 field. The company clearly has the ambition, so what they need to do next is very simple: pump huge amounts of funds into R&D.

  • Zachary Durkin

    I realize that the company got a little ahead of itself concerning their production, but how much of this massive failure is due to where it is located. I don’t know much of Chinese politics, but from what I’ve learned, it’s very corrupt. From what I understand, a company can easily pay off a safety or compliance inspector. Also, what is China’s safety regulation like? Do they even have something like the NHTSA in the United States?

  • Louis Ike

    I echo some of Durkin’s concerns regarding the regulation of the chinese auto industry, particularly with companies looking to export their goods to other developed nations. The American news has held nothing back in the past with regards to safety concerns in chinese products sold into the US, and if this company intends to “outsell Jeep” quality and safety concerns will be paramount in the consumers’s decision making process. Moving on, we have learned in class that car companies experience the largest margin and greatest profits on their SUV’s, light-trucks, and overall larger vehicles. Perhaps, this company rushed a larger sized car into production in hopes of being the first chinese auto manufacturer to penetrate into the more profitable sector of the auto market.

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