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We must provide the right customer with the right product

Dr. Wayne Xing, editor-in-chief and publisher of CBU/CAR, chaired a special panel discussion on Chinese and Indian heavy-duty truck market at the first Truck & Bus World Forum held from December 12 to 14, 2007 in Lyon, France. Leading executives from both Chinese and Indian truck and bus manufacturers spoke at the panel. They include: An Qingheng, former chairman of Beijing Automotive Industry (Holding) Corp.; Huang Gang, deputy managing director of Dongfeng Commercial Vehicle Co., Ltd.; She Cairong, vice president of international affairs, Jianghuai Automobile; Emmanuel Levacher of Renault Trucks Asia and Rajinder Malhan, executive director of international operation of Ashok Leyland Ltd. The following is an interview with She Cairong. – Editor
CBU/CAR: How is JACs export business this year (2007), compared with last year?
She: Commercial vehicles made up a major bulk of our exported vehicles. Sales volume was up 130% year-on-year and sales revenues doubled to ¥150 million ($20 million). Meantime, we have added heavy trucks to our commercial vehicle lineup. Weve sold around 1,000 heavy trucks in overseas markets and 9,000-10,000 units in the domestic market in 2007.
CBU/CAR: When did JAC enter the heavy truck sector?
She: We didnt start a massive launch of heavy trucks until 2005, so only about two years ago.
CBU/CAR:: Whats the proportion of heavy trucks to all the exported vehicles? How much revenue did they bring in?
She: Revenues of heavy trucks contributed a lot to the total export revenue. A single truck sells at ¥200,000-250,000($27,027-33,784), which means ¥250 million worth of revenue for the 1,000 heavy trucks. It made up about 30 percent of our total profits of exports (¥150,000), covering all models of the heavy truck series, trailer and dumpers included.
Though our exported products are dominated by commercial vehicles, we have also launched pilot models of SUV and MPV in overseas markets. Then modifications will be made to those models according to market feedbacks. During the test period, we also conduct the product authorization in those target markets. We stick to the procedure in order to select the right product and the right partner, both of which are very important.
CBU/CAR:: How many partners do you deliver your pilot models to?
She: There could be various modes. We can do the test on them just like what we do with light trucks but withhold the sales first. Then we conduct negotiations with dealers on possibilities of further cooperation, which helps us to find excellent partners. Besides, we can also showcase our products at exhibitions, which proves to be a very effective way.
CBU/CAR: Are your products exported to overseas markets through exclusive dealers?
She: It depends on the target markets. If our partner is good enough, then it will be a good deal for sure. If not, they will also be concerned of operating risks. JACs export markets are in line with the target market of Chinese commercial vehicles. These markets mainly cover Southeast Asia, North Africa, Central Europe, the Gulf area, and also the oil-producing countries, which have a growing appetite for heavy trucks. The European market is mainly located in Eastern Europe, like Ukraine and Russia.
CBU/CAR: Do you have your own employees stationed in the export markets or distribute products through local agents?
She: Through local agents at the beginning. Now we have also started to manage these markets and tried some new modes, like sending permanently-stationed employees to overseas markets.
CBU/CAR: Whats JACs export target in 2008?
She: We are targeting at around 28,000 units, close to $250 million in sales revenue.
CBU/CAR: Will you export the Benjoy?
She: We have set eyes on both domestic and overseas markets since day one when Benjoy was developed. So we will definitely export it. As a matter of fact, we have already received an order now, the details of which are still under discussion. It will be about 1,000 units, for developing country markets.
CBU/CAR: When will JACs commercial and passenger vehicles enter mature markets like Western Europe and the U.S.?
She: Chinese auto manufacturers should take a more rational attitude towards markets in developed countries and regions. Mature markets are of great significance but it also means heated competitions. For instance in the European Union, if our product only has the market access to a certain country through certain channels, therefore only distributed in that certain country, then its still not ready for Europe yet. So far we still need to prepare for a long time to enter the European market.
CBU/CAR: As the Benjoy adopts Italian designs and you also have an R&D center in Italy, is it qualified for the two rules that came out recently in the EU, namely the passenger protection and vehicle scrap standard?
She: We will not make any assertions before official tests are done. We developed the vehicle according to very high standards, but thats no absolute guarantee for its actual performance. The outcome is yet to be seen.
CBU/CAR: Since many Chinese OEMs are exporting vehicles abroad now, whats the core competitiveness of JAC products compared with other China-made vehicles?
She: Both domestic and overseas markets share the same rule — “To sell the right product to the right customer”. The basic laws are almost the same in international markets, thus we should preserve the successful experience and apply it in the overseas markets. Personally, I think JACs success in domestic markets mainly attributes to the following three factors: first, to carefully analyze and know the market, that is to understand customers needs, which is of fundamental significance; second, to hold on to technological innovations because we are pursuing both quality and efficiency. In the international market, its already widely accepted that Chinese vehicles are very cheap. However, when the price is too low, it will inevitably result in poor qualities. So we must strike a balance between price and quality. Last but not least, to set great stores with our partners, strengthen communication and coordination with them.
CBU/CAR: JACs products are generally priced higher than similar products in the domestic market, some models are even ¥3,000-4,000 higher per unit, why is that?
She: Generally speaking, our vehicles are priced about 10 percent higher than similar models in the Chinese market. We equip our trucks with bus chassis, which provides better performance than truck chassis. And we also provide better after-sales services for customers.
CBU/CAR: China is also a huge market for farm vehicles. The market need is about 2-3 million units each year, including both three and four-wheel vehicles. So will you consider producing four-wheel farm vehicles (the low-end three-wheel vehicle is out of the question) to meet the needs of customers in the vast rural markets?
She: Yes, we have been working on economic light trucks targeting the rural market. We will apply the standards of producing and selling standard light trucks while developing the economic light truck. After all, quality is the top priority. In the meantime, we will also try to gain an advantage in pricing.
CBU/CAR: In the passenger vehicle section, JAC has MPV, SUV and the Benjoy sedan in your product lineup, what kind of market pressures are you faced with now?
She: The passenger vehicle market is a highly mature and therefore highly competitive market. And the pressure is tremendous in more rational and mature markets like Europe and U.S. as it involves product quality, services and value. Currently, Korean vehicles sell at a lower price than other vehicles. If we want to penetrate into the European market, our products must be more competitive in terms of pricing than the Korean cars. We have to catch up with them first. Japanese and Korean vehicles are highly competitive because of their economies of scale, which is still out of reach for Chinese vehicles at present.
CBU/CAR: JAC is a state-owned enterprise and it has never formed any joint ventures so far. Normally, state-owned enterprises are more rigid than private-owned businesses in terms of managerial and operational systems. So how is JAC able to break the pattern and maintain an average growth rate of 40-50 percent every year?
She: State-owned enterprises also have some advantages over those privately-owned. JACs staff have a sense of belonging (which is rarely found in private companies) so we can work with one heart. This is much due to our corporate culture. First, every JAC employee tries to realize his/her value. Second, we share our achievements with every one of our staff in the process of our companys expansion. Our employee will rarely hop for another job in other companies once they have got used to our company system, because our system is very advanced so personnel transfer is quite stable. As a matter of fact, JACs operational mechanism could be very flexible. Thirdly, we also have the support of the local government.
She Cairong is 3rd from left

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