Writing by Zheng Wen
Editor | Zhou Changxian
In 1886, a young man took a friend’s carriage for a ride, which left a deep impression on him. He then borrowed $2,000 from the bank to purchase the production rights from a factory in Coldwater, Michigan, and founded Flint Carriage Company in Flint with a partner.
The company eventually became one of the largest carriage manufacturers in the world with sales reaching 2 million dollars at the turn of the 19th and 20th centuries.
During this period, vehicles powered by gasoline engines had already hit the road as a substitute for horses. At that time, cars looked like “iron clunkers”, with weird appearances, loud noises, and emitting black smoke. People were both fearful and disgusted with them and wanted to avoid them at all costs.
However, the development of new technologies and species was unstoppable by human power. At that time, relevant data showed that carriage makers, companies, and drivers in London held thousands of strikes and boycotts. The wheels of history, however, still rolled forward. How big was this group of protesters? The population of London was 2 million people at that time, and nearly 100,000 people worked in the carriage industry.
In 1896, the British government abolished the ridiculed “Red Flag Act”, which enforced a 4 mph speed limit for cars in the suburbs and a 2 mph limit in urban areas. They also required a man holding a red flag to walk in front of the car several meters away to remind people to be aware of safety.
On Easter Sunday in 1900, Fifth Avenue in New York was full of carriages. 13 years later, it became the “car street”. It was rare to find a horse-drawn carriage in the busy traffic.
Did the young man’s carriage company go bankrupt? No.
In 1904, he joined the management of Buick, a local automobile company with great potential. With the resources of the carriage company and his excellent sales skills, he made the struggling and heavily indebted company one of the most successful automobile companies in the United States. From then on, under the influence of the times, the young man completed his transformation.
By now, some people may already know who he is. Yes, he is the founder of General Motors, William Durant.
He established a new business model for the automobile manufacturing industry, integrating multiple relatively independent brands, which continues to this day.# The Answer Lies in Going Back to the Beginning
Henry Ford, Durant’s competitor, was dedicated to producing a single type of car. However, Durant established different car models and pricing based on the different needs and financial capacity of buyers. He acquired Cadillac and over a dozen other vehicle and parts manufacturers. In 1908, these companies merged to form General Motors.
Durant’s lifelong theme was “change”. In addition to facing enormous transformations, he was removed from power twice. However, he succeeded through marketing the Chevrolet C Series Classic Six and the popular Royal Mail Roadster, and exchanged a large amount of Chevrolet stocks for General Motors stocks until he had controlling stakes in both companies.
Durant can be considered as the spiritual totem of General Motors, which dares to face challenges and innovate.
A hundred years later, the transportation industry is once again experiencing a huge shock. In terms of determination and action, General Motors’ transformation efforts and investment in new technology are eye-catching. The determination of Mary Barra, Chairman and CEO of General Motors, can be seen in every corner of the headquarters building. However, at the forefront of change in the Chinese market, the wind of change has been slow to blow across the ocean.
History seems like a spiral cycle. Under the same enormous change, the same new choices are needed. General Motors chooses to follow the historical path and write a new chapter for the new era. Taking the business model of Durant before as an example, they have launched The Durant Guild platform.
The Durant Guild is a lifestyle platform that General Motors has created in China for high-end import businesses. Based on exclusive communities, they face consumers, select the most iconic high-end pure electric and fuel car models under the brand, and promote the further development of business in China.
Through the comparison and analysis of historic documents signed by Durant in various periods, General Motors’ determination towards The Durant Guild can be seen through William Durant’s name and signature.
Starting on September 9th, The Durant Guild held a week-long offline exhibition in Shanghai named “The Realm of Daring Action,” demonstrating various products such as full-size SUVs, pickups, and sports cars, and various lifestyle experiences that will be available on the platform soon.The exhibited models include GMC Pure Electric Hummer, Yukon, Chevrolet Tahoe, Solord, Corvette, etc. Perhaps soon, some of these models will be released in China.
In the past, the A-level car market was the most mainstream segmented market in the Chinese auto market. After years of evolution, Chinese people’s preferences gradually turned to SUVs and increasingly larger sizes. “Big cars” could become popular and even become an industry consensus.
For the General Motors’ Doug Lange platform, this is certainly a huge opportunity, as some full-size models are segmented by independent brands that have not yet entered them. Can the Doug Lange platform find new blue ocean opportunities in stock competition?
“Times Have Changed”
In 2018, the cumulative sales of narrow sense passenger cars in China were 22.35 million, down 5.8% year-on-year, ending the era of high growth for 28 years.
From 2013 to 2017, China’s auto sales achieved year-on-year growth rates of 13.87%, 6.9%, 4.68%, 13.7%, 3%, respectively. In that era, importing models that could quickly achieve economies of scale was the king’s road, and brute-force growth was a common feature of all brands, with no time to think about more problems.
Therefore, the investment model of multinational car companies in China, the “joint venture car company,” has also its historical shortcomings while enjoying the era of dividends, including:
- The models introduced by joint venture companies tend to be focused on high-volume models
- The technology introduction has certain lag;
- The direct result of long-term operation is incomplete brand development and poor continuity
After 2018, the auto industry began adapting to a new normal, where the market really could decline. Hidden problems began to surface gradually, and joint venture companies suffered from widespread weakness in fierce market competition.
In fact, General Motors’ strategy in China is already relatively flexible and agile. It was the first to establish a technology development center in China for joint ventures to accelerate localization; afterwards, it also exported domestically produced vehicles and engines to overseas markets, and had the Pan-Asian Technical Center lead a global small car initiative.However, this cannot stop the downward trend of General Motors in China. For example, Cadillac is basically a high-volume model, with an actual selling price of less than 300,000 yuan; Buick, originally positioned as a lightweight luxury brand, is also gradually declining; Chevrolet is so low that the price range of Sail has been lowered to 60,000 yuan. The relatively slow pace of product updates also makes the brand fall behind in the market competition.
A dark cloud has always hung over the multinational auto companies, and that is the fact that the brand image presented by joint venture companies cannot truly represent the brand’s core and complete image.
How can the complete image of an automaker be presented to the Chinese market without any discount? This is a common historical challenge for multinational automakers.
“Doronge” provides the answer for General Motors.
In the past, the most unique and iconic models under General Motors have not been introduced into China. With its appearance, together with SAIC-GM, it completes the overall picture of General Motors. The high-end but small market size models complement the model matrix of SAIC-GM.
It will introduce the most iconic models through selection and enhance the brands under General Motors, especially the Chevrolet and Cadillac brands in the Chinese market.
So, is “Doronge” a project full of advantages? Of course not. Creating a new sales platform, a community circle of car and life, is not an easy task.
As General Motors clearly realizes, the challenge is: how to promote products and experiences with different styles through a unified platform? How to meet the personalized needs of Chinese consumers who advocate unique lifestyles?
In addition, how to allocate the product matrix with SAIC-GM is also a possible conflict, and how to achieve maximum win-win in the future still needs to be explored over time.
However, if you don’t do it, the challenges that are put on the shelf will never be resolved. If the “Doronge” model can be successful, it will not only have a huge boost for its own brand, but also be a good inspiration and sample for multinational automakers.
“Sometimes, traditional automakers like General Motors, even if we are innovating rapidly, will be viewed from different perspectives. But that’s okay, we will gradually prove it.” Mary Barra has always believed so.
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.