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.