Date
23 May 2017
Surpassed by numerous younger local brands in design and features, Hongqi managed to sell only 4,800 luxury sedans last year. Photo: jeng-car.blogspot.hk
Surpassed by numerous younger local brands in design and features, Hongqi managed to sell only 4,800 luxury sedans last year. Photo: jeng-car.blogspot.hk

Can China’s ‘Red Flag’ limo lift its flagging sales?

Last year, several Chinese home-grown auto brands achieved record sales. For example, FAW Car Company (00800.CN), Great Wall Motor (02333.CN) and Geely Automobile Holdings (00175.CN) reported car sales of 1.31 million, 1.07 million and 760,000 units respectively.

However, luxury car marque Hongqi, or Red Flag, which was once a symbol of China’s high-end industry, saw its sales amount to just 4,800 units during the year.

The first Hongqi car was manufactured in Changchun in 1959.

It’s said that Chen Jiageng, a patriotic Chinese businessman, had sent two Ford cars to the central government as a gift. But then-leader Mao Zedong refused to take a ride in an American car.

Authorities then decided to make a Chinese car with the help of Soviet expertise and technology.

The first Hongqi sedan CA72 was introduced to celebrate the 10th Anniversary of the establishment of the People’s Republic, becoming part of the National Day parade. The highe-end car became a hot topic for global media, given the poor economic situation of China at that time.

Hongqi is still the designated ride for top government officials in China. In 2015, President Xi Jinping rode into downtown Beijing in a Hongqi luxury sedan for a troop inspection.

In addition to catering for the government market, Hongqi launched smaller models in the 80s targeting at private consumers.

It was very popular with Chinese entrepreneurs at that time, who took pride in using the same car brand as their top leaders.

Hongqi sales hit a peak of nearly 30,000 units per annum in late 1990s.

However, in recent years, as the China market was flooded with foreign brands of all kinds, and the technology of numerous local car firms also advanced notably, Hongqi lost its allure completely.

The latest generation of the Hongqi sedans, the H7 series, were considered bulky, unreliable and fuel-guzzling. With a price tag of around 300,000 to 500,000 yuan, Chinese consumers would rather buy a mid-range Benz or Audi with that kind of money.

Hongqi sales plunged to an average of about 4,000 units a year between 2013 and 2016.

To reverse its fortune, the company said it would launch eight new models within three years to cater for young customers at more affordable prices. It aims to ramp up sales to 50,000 units by 2020.

As Hongqi had spent 5 billion yuan to develop H7, which turned out to be a complete flop, it doesn’t inspire much confidence in the company’s new plan.

Designed to be a car for party elites, it remains open to question if Hongqi can ditch its ‘DNA’ and come up with innovative designs and a fresh appearance that the mass market wants.

Royce Rolls is one of those rare examples where a luxury car brand is a supplier to the British Royal Family and has also successfully tapped into the ultra high-end of the auto market.

The problem with Hongqi is that it’s not there yet in terms of design and technical capability.

This article appeared in the Hong Kong Economic Journal on March 1

Translation by Julie Zhu

[Chinese version 中文版]

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RC

Hong Kong Economic Journal columnist

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