Multi-brand strategy in the automotive industry, starting from "The Art of War" by Sun Tzu.

Brand Strategy: the Power of Multiple Brands

Author: Zheng Wen

Editor: Zhou Changxian

“The Art of War” says that armies have no constant formation, and water has no constant shape. The same rule applies to the brand strategy of a business.

When a brand reaches maturity and needs to expand its market size, how can it occupy more market shelves and increase the chances of its products being chosen in the market competition?

One of the answers is through the combination of multiple brands.

Through a multi-brand strategy, businesses can use sub-brands to explore more specific fields and achieve the goal of occupying a larger market share, while ensuring the stability of the main brand. Generally speaking, even if the sub-brand operation fails, the trial and error cost is relatively lower, and the main brand will not be greatly affected.

Of course, a coin has two sides. The multi-brand strategy frequently falls into some pitfalls, such as failing to establish obvious differentiation in product positioning and brand culture, which may lead to internal friction. More importantly, the main brand, unable to support new brands, can be dragged down along with them.

Another point worth noting is that if the main brand is not strong enough, or it’s difficult to discern which brand is the main one, it will result in the overall competitiveness of the business falling behind in the long term. Even from a promotional perspective, there is an issue of “brand operation being fragmented, making it difficult to grasp the main focus of marketing.”

In the hundred-year history of the automotive industry, the growth and strength of car brand enterprises are accompanied by multi-brand strategies. From Europe to North America, and then to East Asia, most car companies have their own multi-brand systems.

Taking Ford as an example, its multi-brand strategy has been going on for nearly a century. Ford respectively acquired Lincoln in 1922, established Mercury in 1935, created Mustang in 1964, acquired Mazda in 1979, acquired Aston Martin in 1987, acquired Jaguar in 1989, acquired Volvo in 1999, and acquired Land Rover in 2000.

At its peak, Ford’s sales once topped the world, and the multi-brand strategy was an integral part of its success. However, there are always two sides to everything, and managing too many brands can be overwhelming.

In 2008, the US subprime mortgage crisis broke out, almost destroying Ford’s efforts over the years. It had to make a tough decision the next year to optimize its brand matrix and return to the “One Ford” strategy. The butterfly effect of this move has lasted until today. For example, it not only created opportunities for Geely to acquire the Volvo brand in 2010 but also laid the seeds for future development and growth.Actually, the Big Three in Detroit have all experienced similar cycles. General Motors cut many small brands and retained Chevrolet, while Chrysler has been acquired several times due to its lack of a flagship brand.

In China’s domestic brands, Chery was the first to experiment with the idea of “more children, more fights” and launched sub-brands such as Karry, Wey and Riich. Later, most mainstream domestic brands explored multi-brand strategies, and many non-mainstream brands often “started from scratch”.

Below, we will analyze three different brand combination strategies using Geely, BYD, and Great Wall as examples.

Geely: A typical multi-brand strategic layout

Geely started to try out multi-brand strategies very early on. We can trace this back to 2008 when they launched global Eagle, Emgrand, and Englon.

At that time, multinational car companies were aggressively promoting economical sedans. Geely’s multiple brands had serious internal friction and did not form strong competitiveness externally. In 2014, Geely released the “Geely Forever” strategy, announcing the end of the previous round of multi-brand strategies.

However, life always has its twists and turns. Under the “Geely Forever” strategy, Geely’s 3.0 products, such as the Emgrand L, Emgrand GS, Bo Yue and other models, became hot sellers.

In 2017, Geely began a new round of brand combination, building a multi-brand system that covers all major sub-segments in the passenger car sector. So far, Geely Holdings has many brands, including Geely, Volvo, Lynk & Co, Geometry, Polestar, Lotus, LEVC, Proton, and Zeekr.

Compared with other brands, Geely’s multi-brand strategy is the most aggressive and controversial.

However, precisely because of the support of the multi-brand system, Geely avoided the sharp decline in sales that other multinational automakers experienced. In other words, Geely’s multi-brand strategy itself is not a problem, and its product structure also conforms to market trends.

In our opinion, Geely’s most urgent task at present is to adjust and upgrade the product structure of its flagship brand, and apply new technological achievements to its flagship brand as soon as possible. This will result in better market performance and higher long-term competitiveness efficiency.

This is also one of the underlying logics behind the birth of Geely’s Galaxy.

On February 23rd, Geely released its new energy strategy, themed “Intelligent and Electric, Still Geely”. Senior media professionals believe that “Although Geely Galaxy is not an independent brand or company like XPeng, this is the strongest effort by Geely to strengthen its intelligent electric label, and the key is ‘Still Geely’.”

In other words, focusing on the 150,000-300,000 yuan price range, Geely Galaxy, which solely produces high-value new energy vehicles, is Geely’s adjustment and upgrade to its main brand in the era of intelligent electric vehicles.

In the future, Geely needs to further optimize its internal structure and minimize resource consumption. In order to avoid the passive self-harm like Ford, Geely must take the initiative to optimize its system and build a more competitive multi-brand system.

BYD has a diverse business structure with 19 business divisions. Little known, however, is that with regards to automobile-related businesses, the automotive sector only begins with its 10th business division. Simply put, in earlier times, BYD’s production of mobile phone components and battery business were stronger than automobile manufacturing. An interesting fact is that BYD’s energy storage has a global market share of 23.3%.

In the latest Q&A session at the shareholders’ meeting, Charlie Munger revealed that he had guided BYD, which initially produced phone batteries, to undergo a strategic transformation relying on batteries. He emphasized, “I did have a rather significant effect on BYD’s future direction at that time.”

On the surface, automotive, battery, and semiconductor businesses under the same BYD name seem to be unrelated business segments. However, viewed from the industry value chain, they exist in upstream and downstream relationships. In the new energy vehicle industry, BYD has a complete industrial chain layout, from battery raw materials, to the core of the new energy vehicle’s three-electric system, to the recycling and reuse of power batteries, forming a complete closed loop.

Thanks to the good vertical integration of the industrial chain, BYD’s profitability has been excellent. Recently, BYD’s 2022 performance forecast showed that non-net profit attributable to the parent as after-tax will reach RMB 15.1 billion to 16.3 billion Yuan, an increase of 1,103.55% to 1,199.2% year on year.

Compared with Geely’s typical multi-brand strategy, BYD is more cautious, firmly implementing a “One BYD” strategy for an extended period before starting to cautiously plan for a multi-brand strategy in recent years.In the era of gasoline vehicles, BYD did not adopt a multi-brand strategy because it focused less on gasoline vehicles and concentrated on the research and development of electrification technology. In fact, it is thanks to this focus that BYD seized the market opportunities of electrification.

Nowadays, BYD, which has officially announced that it will no longer sell gasoline vehicles, has a very complete new energy product matrix, which covers most mainstream market segments and mainstream price ranges, ranging from sedans to SUVs, and then to MPVs.

Today, we can certainly see the panoramic view of BYD’s strategy. Based on this strategy, BYD’s abandonment of gasoline vehicles is completely in line with the overall strategy of the enterprise. However, in those years, such a strategy was very forward-looking.

In terms of different styles at the same price range, BYD still did not redefine the brand, but chose to sell products with different styles, which positioned the products with stable atmosphere and partial sports personality separately, i.e. Wangchao Network and Haiyang Network.

2022 is the year when BYD’s hard work pays off, but it can no longer bear the wider price range market and needs a new brand to develop the huge market space of more than 300,000 RMB. Therefore, Yangle was born.

Strictly speaking, BYD’s multi-brand strategy planning did not start with Yangle, but from DENZA, which was a joint venture with Daimler in the early years. At the end of 2019, BYD acquired 90% of DENZA’s shares and achieved absolute control, making DENZA an important layout of BYD to fill the market gap between BYD brand and Yangle brand.

On November 16, 2022, at the launch conference of the 3 millionth new energy vehicle of BYD, Wang Chuanfu revealed that in addition to the Yangle brand, BYD will also launch a brand new brand with a strong professionalism and personalized features in 2023.

In the future, BYD will form a brand matrix including BYD brand (Wangchao and Haiyang), DENZA brand, Yangle brand, and a professional personalized new brand, covering from home use to luxury, from mass to personalized, to meet the multi-dimensional and all-scenario car use needs of users.

Great Wall: Brand Subdivision Tears Open the Market

It is well known that Great Wall torn apart the market in the SUV dividend period by virtue of its “category-focused strategy”.From the perennially ranked first in the subdivision market with the Haval H6, to forming a model series, and then forming a brand, no car company has entered the top group like Great Wall, using this method. With this experience, Great Wall has also formed an advantage in the pickup truck market.

Great Wall’s category segmentation can be said to be a masterpiece, directly attacking the inherent “brand concept” cognition. This is similar to Chrysler’s strategy back in the day. Focusing can quickly gain a local competitive advantage, and brands are easy to break through in the early stages of development, forming initial advantages in the market.

Of course, this strategy also has obvious disadvantages. Categories mean a narrow track, meaning abandoning the mainstream market strategy. In Great Wall’s brand matrix, Haval, Wey, and Tank are relatively focused on the SUV market, while Euler and Great Wall pickup trucks have clear distinctions, but they are not brands that cover the mainstream.

During the transition to electrification, the Haval H6, positioned as “China’s SUV global leader”, is no longer just a problem of losing its crown, its sales have also been greatly surpassed by the Model Y and Song PLUS DM-i.

For a long time, within Great Wall, the market and marketing logic has always revolved around products, and the “strong product, weak brand” route has weakened brand cohesion.

At present, for Great Wall, its six sub-brands, Haval, Tank, Great Wall pickup trucks, Wey, Euler, and Salon, should redefine their priorities and strengthen their main brands so as to win the new energy battle.

It is reported that on March 8th, Great Wall will release its smart new energy strategy, which will inevitably introduce new measures to reposition the brand matrix to respond to the challenges of electrification and smart transformation.

Conclusion:

Perhaps you may ask, which brand strategy is the best?

My answer is, the one that is suitable for oneself is the best. This is not a correct cliché.

On the one hand, the brand strategy of all enterprises is a dynamic development, just as “The Art of War” says, the army is always in flux, and water always changes its form. On the other hand, different brand strategies may achieve sustainable development after experiencing birth pains.

For any car company, the important premise of recognition is that multi-brand strategies are roads full of thorns and traps, and full mental preparation must be made. In the current wave of intelligent and electrically-driven development, whether it is a hundred-year-old multinational brand or a Chinese independent brand on the rise, a strong main brand is the cornerstone of participating in market competition.

值得提醒的是,传统的对标文化也许将失效。因为,越是动荡,越不能将浮标作为参照系。关注自身战略,才是唯一的定海神针。

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.