Global Entrepreneur’s in-depth report, “Yin Tongyue in a cage,” tells vividly about the inside story of China’s leading independent-branded carmaker, Chery Auto, as well as the trials and tribulations of its chairman and CEO, Yin Tongyue.
“We can now proudly say that we know how to make cars,” Yin said during the company’s recent launch ceremony of the Arrizo 7 sedan.
This has been a revealing statement for Chery’s legendary founder, who studied automobile engineering 33 years ago in college, worked for 17 years upon graduation first at FAW and then as director of FAW-Volkswagen’s assembly plant before going to Wuhu in his native Anhui Province to start Chery Auto from scratch 16 years ago.
In eight years by 2007 Chery accomplished a miracle of selling a cumulative total of 1 million cars and annual sales reached a record 682,000 units in 2010.
But those were the days, Yin now realizes, when Chery and he himself did not really know “how to make cars.” More accurately, Yin realizes that the company did not know how to make quality cars up to the international standards of automobile R&D and manufacturing.
Yin Tongyue’s candid admission about his perception of automobile manufacturing has been the result of cruel market realities over the past four or five years, especially when China’s automobile engine suddenly lost steam in 2010. Chery sales in 2012 were 550,000 units, down 13 percent from 2011. After 10 years being the leader in sales of Chinese brands, Chery was overtaken by Great Wall Motor, which surpassed Chery’s total by more than 100,000 units. Chery had the worst performance in history in the first six months of 2013 with sales of only 223,000 units, down 16 percent. Its market share plummeted from 5 to 3 percent and its ranking has fallen from No. 1 to No. 4.
The troubles started even earlier. The company’s profit before tax went from ¥1.4 billion in 2007 down to ¥314 million in 2008 and again to ¥72 million in 2009. In the same three years government financial assistance to Chery went up from ¥287 million to ¥470 million and ¥633 million.
Yin Tongyue has realized the problems of Chery Auto and has been working aggressively over the past four years in creating a new Chery through system engineering and the development of the Arrizo 7. But whether Chery would be able to make a turnaround through the Arrizo 7 remains to be seen. Global Entrepreneur points out that Yin Tongyue often “feels like an animal in a cage.” “My pressure comes from shareholders, the government, employees and founding members,” he was quoted as saying.
The nature of Yin Tongyue’s cage is state-ownership and government control. With investments coming from the local governments, Yin Tongyue is at best an appointed general manager rather than an independent entrepreneur. In a way both his success and constraints come from the government. From day one up to this moment, the godfather and real boss of Chery Auto has been Zhan Xialai, former Party secretary of the city of Wuhu and now executive vice governor of Anhui Province.
Yin Tongyue’s cage seems to be “indestructible” and Yin to this very day has been an “insignificant prisoner.”
It is not an enviable job for senior executives of state-owned automakers to operate in a growingly competitive automobile market unless they are restructured into market-based, privately held or public-listed entities.