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State-owned automakers can make good cars, say executives from Chang’an and GAC Motor

BEIJING – Whether or not state-owned automakers can produce cars and produce them with high quality was one of the questions debated at the conference.

The answer, according to executives from Chang’an Automobile Co., Ltd. and GAC Motor Co., Ltd., passenger vehicle subsidiaries of two state-owned automobile groups, Chang’an Auto Group and GAC Group, is confirmative.

“State-owned automakers can make good cars, the key is how they respond to the market and how they tackle and resolve problems when they arise,” said Yuan Mingxue, president of Chang’an International Corp., at the panel discussing China’s Competitiveness in the Global Market. “At the end of the day state-owned automakers face the same customers that private companies face. So whether they can make cars or not is really about whether they can compete through market mechanisms.”

Chang’an, which ranks fourth nationally in group sales, currently leads sales of passenger vehicles (including microvans) among Chinese brands. According to Yuan, Chang’an’s annual passenger vehicle sales under the namesake brand have roughly doubled every year from just 4,000 units in 2006 to 500,000 units in 2013.

Wang Shunsheng, assistant to president of GAC Motor Co., Ltd., which produces and sells cars and SUVs under the Trumpchi brand, said that the fact his company’s products have improved in industry rankings on quality fully illustrates that state-owned companies can make good and competitive cars.

“As state-owned automakers we should take the lead in developing Chinese independent brand cars that are based on market and consumer demands. That is the only way we can go global,” said Wang.

GAC Motor has established, according to Wang, the so-called “GAC Production System” based on what it has learned through joint ventures with Toyota and Honda and revolved around a management model of “platform of a state-owned company efficiency of a private company and processes of a joint venture. It has also established a global R&D network and supply relationships with global leading suppliers to ensure quality.

GAC Motor sold 85,000 cars and SUVs last year but is eyeing a sales target of 500,000 units (10 percent export) in 2017 and 1 million units (20 percent export) in 2020. To achieve these goals and further grow the Trumpchi brand, the company is earmarking ¥34 billion ($5.57 billion) in investment including ¥12 billion in R&D by 2020, according to Wang.

Jack Cheng, president of Magneti Marelli China, who has worked with both Chang’an and GAC as a supplier and OEM partner, echoed comments from Yuan and Wang. “Whether its state-owned companies or private, as long as they compete based on the market and through cooperation and globalization, there is no doubt in my mind they can become global brands,” said Cheng.

Yuan warned, however, that both state-owned and private automakers still lack good management systems compared with established foreign brands and there are still huge gaps in quality, sales and service. “There are huge challenges and the path to a global brand is long and arduous,” said Yuan.

Wang said that GAC Motor will fully embrace the challenges on the path toward being global. “Our products are getting better and we will grow and develop through competition. We will strive to push ahead our globalization strategy so that the international area will change their traditional view of Chinese vehicle products.”

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