CBU/CAR recently had an exclusive interview in Beijing with She Cairong, newly elected board member of Anhui Jianghuai Automobile Corp. (JAC), a publicly listed company based in Hefei, capital of Anhui Province. She is vice president of JAC and president of JAC International in charge of the company’s overseas business. The following are highlights of the interview, which cover the company’s performance so far this year, JAC’s international business development and the evaluation of company chairman Zuo Yan’an who retired earlier this year. − Editor
Stable domestic sales
CBU/CAR: Please tell our readers about JAC’s operation so far this year, especially in light of slowed overall market demand in China.
She (pronounced as sher): The market this year has not seen the major growth of the past few years. Manufacturers now feel pressured as to how to respond. Our management has decided to focus on operational quality instead of volume and scale. The slowed market has offered us a good opportunity to optimize management and business activities.
But we are also preparing for increased future demand. An Jin, our new chairman, made that very clear during JAC’s press conference at Auto China 2012. “JAC has undertaken a historically different strategy compared with most OEMs,” An said on April 23. “We have always invested in capacity building when the market is down in preparation for a new round of growth. But we have done so based on our healthy cash flow, and not relying on debt financing or the stock market. Our capacity building never affects the ratio of our assets to liabilities.”
JAC’s sales so far this year, judging from end-user numbers, have maintained last year’s level.
CBU/CAR: Any specific numbers for the first four months this year?
She: Based on end-user sales, they were down slightly by about 3 percent.
CBU/CAR: What are prospects for 2012?
She: We expect that output and sales in 2012 will be stable. Sales last year were pretty high in the first half but came down significantly in the second. We have seen reduced inventories this year and expect to see growth later. Total end-user sales in 2012 will be at least equal to those in 2011.
Overseas sales up 5 percent
CBU/CAR: What about JAC International sales?
She: Our overseas sales in the first four months were up about 5 percent compared to the same period last year. However, JAC sales in Brazil in January-April 2011 contributed to about 50 percent of our total overseas sales. This year, its contribution was down to only 20 percent. This means JAC sales in other markets were significantly up. In other words, overseas sales, not including Brazil numbers, were up about 60 percent year-on-year.
CBU/CAR: How would you evaluate China’s vehicle export market?
She: JAC’s export of both commercial and passenger vehicles has been growing over the years. Chinese automakers have made several achievements in their export efforts. The first one is familiarization with the global market. I believe independent automakers now have a fairly good understanding of the major markets in the world. The second achievement is the building of an overseas sales team. The third is improved vehicle product quality. And the fourth is the capability to provide adequate sales support and aftermarket service.
JAC and Navistar executives at Auto China 2012
CBU/CAR: What about JAC’s efforts in Russia?
She: To be frank with you, Russia is the only overseas market where JAC is late to enter, especially in passenger cars. But we expect to have a major development there this year. We have been well aware of the risks involved in Russia. We would approach it slowly than run into major risks.
CBU/CAR: What about South Africa?
She: We expect to have a major move in South Africa and will inform you as soon as it becomes public. We have been working there for two years and our philosophy has been not to enter any market before we are fully prepared.
CBU/CAR: What about Australia?
She: There have been a number of news reports about our efforts in Australia. JAC was the only Chinese OEM to participate at the Austrian Commercial Vehicle Show in March. We make sure that we don’t disappear after making an initial appearance at any overseas trade show. Our vehicles will be launched in Australia in July at the latest.
CBU/CAR: JAC is ready to invest in an assembly plant in Brazil. Are there plans for building localized assembly plants in other market?
She: I am not in a position to revel JAC investment plans. But we have already announced our strategy of localized production in major global markets. In Brazil, for example, we will produce trucks after cars. We are also working in Mexico in preparation for producing trucks. I am proud to say that JAC leads Chinese independent automakers in overseas production.
CBU/CAR: Your operation in Western Europe?
She: Our trucks have already sold in Turkey. We are now working on upgrading our products to meet new emission regulations. We have completed a comprehensive study of passenger vehicle regulations in Europe to better understand the market and our own products.
Quality, branding and service in Brazil
CBU/CAR: Please tell us what contributed to JAC’s successful launch of your cars in Brazil.
She: I have visited Brazil at least 7-8 times. The Brazilian people are friendly, enthusiastic and bold. They are ready to try new things and new products.
We also benefit from the China’s rising global influence. Our partner not only tells consumers about JAC vehicles and brands, they also inform them about the significant changes taking place in China.
But of course the fundamental reason for our successful operation in Brazil is our products. The quality of JAC cars is recognized by Brazilian consumers. Compared to other Chinese brands, the price of our cars is higher, but we sell more. The next important factor is service, which is integrated into product quality. It is a commitment to customers. The feedback from consumers about JAC products and service has been very positive thanks to our dealer partner.
CBU/CAR: JAC cars are sold in Brazil about 10 percent cheaper than similar products made by established multinational carmakers, according to an E&Y partner in Brazil.
She: Compared to the pricing difference in China between local and multinational brands, this is a great achievement. The Tojoy, our 1.3L compact, is considered a good car in Brazil.
CBU/CAR: Are JAC customers mostly first-time buyers?
She: No. They are mostly buyers for replacement vehicles, not first-time buyers.
Zuo Yan’an’s legacy
CBU/CAR: JAC has a new board now and you are a board member. Does it have any new thoughts on JAC’s short- and long-term growth strategy?
She: Not really. JAC’s development plan for 2011-2015 was drawn under the direction of Zuo Yan’an, our former chairman. And An Jin, the new chairman has emphasized the importance of executing our plan.
CBU/CAR: How do you evaluate Zuo Yan’an’s contribution to JAC?
She: Zuo’s contribution to JAC was glorious and he has built a corporate standard for us. His legacy also involves the development of Chinese independent vehicle brands.
CBU/CAR: Analysts believe that Zuo Yan’an was the soul of JAC. He retired early this year but is still involved in JAC’s operation as a consultant. Do you see any impact on the company when he retires completely?
She: Zuo’s contribution is the establishment of a corporate system or mechanism. JAC is now an enterprise of learning, with a unique corporate culture, corporate management team and a scientific decision-making process.
CBU/CAR: These were made possible with the support of the local and provincial governments, especially the crucial step in reforming the ownership structure of the company. Chery also benefitted from such an ownership structure reform. Most of the large state-owned automobile groups, such as FAW, SAIC, Dongfeng, etc., have not been able to do so.
She: They are too big to be able to make structural reforms.