The Impossible Triangle Faced by Great Wall Motors
Author | Roomy
Editor | Chalex
In the past few days, I read an article titled “The Misconceptions of Starbucks in China,” which talked about some of the problems that Starbucks is currently facing. Among them, there is a sentence that deeply resonates with me, which is the “Impossible Triangle of Space, Product, and Scale”.
The “Impossible Triangle” is a concept in economics, referring to the difficulty of achieving high returns, low risk, and high liquidity in investment. Currently, Great Wall Motors, which is investing in the future, also faces an “Impossible Triangle” of transformation, market, and profit balance.
Achieving the balance and integration of the three is not an easy task, and it is bound to be a painful and contradictory process.
Regarding some of the difficulties encountered by Great Wall Motors in its transformation, we will not elaborate any further, as it has already been extensively discussed. Great Wall Motors itself is aware of the problems and is seeking thorough changes.
What we want to explore is how Great Wall Motors can achieve a balance in this “Impossible Triangle” in the future.
The Phenomenon of Upsetting the Table Will Not Last Long
If the trend of electrification and intelligence is a train that Great Wall Motors wants to board, then the fiercely competitive price war is another train they face.
So, should they get on board or wait? It is a test of mentality.
“To lower prices hurts the enterprise, not to lower prices hurts sales.” On March 10th, at the Great Wall Motors Intelligent New Energy Conference, Mu Feng, the CEO of Great Wall Motors, meant that they want to get on board, but they need to seriously think about how to get on the train and fight in it.
Besides, sales and profits have never been a multiple-choice question. There is a closed-loop logic in between. Without sales, there is no market share, no brand awareness, and no way to share costs. The transformation of new energy will be hindered.
You see, it’s the logic of the impossible triangle again.
At the end of February, Li Ruifeng, the chief growth officer (CGO) of Great Wall Motors, talked about sales in an interview. He said, “As the growth officer, if the sales performance didn’t meet our expectations, do you think I will feel pressure? I won’t. It’s like squat and jump. It’s a process.”
Mu Feng said that last year he asked himself a question: if Great Wall Motors successfully transitioned by the first half of 2023, but too many oil vehicles piled up at the terminals, what should they do? Especially when the brutal price wars have already begun and the fuel vehicles are fighting to the death.
During an interview session at the New Energy Conference, he asked the attending media a question, “Are you anxious about the current price cuts?”
Some media muttered softly, “We are not anxious. Is Great Wall Motors anxious?”
To say that they are not anxious is impossible. Competitors are using every merciless move in the price war, even “buy one get one free” is not uncommon. Even some local governments have entered the fray and launched the strongest vehicle purchase season activity ever seen.
To describe the situation of the price war, the phrase “turning the table over” can illustrate the scene. As the CEO of Great Wall Motors, Mu Feng’s determination and firmness have been greatly tested towards how to resolve the contradiction between production volume and transformation.
At least for now, Mu Feng has withstood this pressure. He said, “The phenomenon of overturning the table will not last.” This sentence also reflects his question about how to deal with an excess of fuel vehicles at the terminals?
So, what did Great Wall Motor do?
In the short term, Great Wall Motors acknowledged that some models could benefit consumers. In addition, this year Great Wall Motors will have a change in its product pricing strategy. “For new energy models launched by Great Wall Motors this year, we will price them based on competitive pricing principles,” Mu Feng said. However, pickup trucks and tanks are the moat that ensures Great Wall Motor’s profits. This is also a way of “getting on board.”
Of course, Great Wall Motors does not intend to constantly “lower prices,” so in 2022, they will not seek temporary relief nor pursue excessive sales growth, but aim to prepare for 2023 by adjusting the overall inventory structure.
Long-termism: The Core Goal of Great Wall Motors Channel
Great Wall Motors follows the philosophy that each dealer’s inventory is also the manufacturer’s inventory, and wholesale quantities are not the only benchmark for assessment. The inventory sold by dealers to customers, after registration, serves as a joint assessment target for both the manufacturer and the dealer. Only when the manufacturer and the dealer both benefit can Great Wall Motors reach its channel core goal of mutual profit.
“If there is too much inventory, the most likely action to take is clearing it out and lowering prices to make room for our new energy products,” says Mu Feng. He believes that excessive inventory not only hurts profits but also goes against the trend of transitioning to new energy. Certain practices by our competitors have validated some of the judgments that Great Wall Motors made at the time.
“I absolutely believe that overturning the table for business reasons will end when the business issues are resolved. Overturning the table for the sake of the capital markets will also stop once the industry returns to its essence. Overturning the table for various reasons will not last when the reasons are not sustainable,” he says. He believes that everyone has a different motive for overturning the table, and the duration of the phenomenon will not end at the same time, so it will not persist.
Cui Dongshu, secretary-general of the National Passenger Car Market Information Joint Conference, believes that this “price war” is mainly due to the “National Standard VI A” clearance, resulting in “price-stomping,” and now it has reached its climax. He expects the end of the “price war” to be around April.
Mu Feng stated that Great Wall Motors will follow the interests of product and brand categories that are already in the red competitive area while getting closer to the target audience. This is the strategy that Great Wall Motors wants to implement.
However, it is not easy to be an “outsider” while still in the middle of the situation. As Li Ruifeng said, “Do we want quantity or profit? Challenging the competition also requires courage and long-term competitiveness.” Finding certainty amidst the vast uncertainty is what Great Wall Motors needs to do.
Mu Feng firmly believes that "grasping long-term trends and adhering to long-termism is the only way to win the future." This is about attitude. ## "To make new energy the Great Wall, we must also make Great Wall the new energy." With the right attitude, it still needs to be implemented in the fundamental layout, otherwise it is just empty talk. In addition to this, in the past two years, a series of industry adjustments have invisibly slowed down the transformation pace of Great Wall Motors. At this watershed moment of life and death, Great Wall Motors must have a more clear direction of thinking. "We not only want to make new energy for Great Wall, but also make Great Wall the new energy." At the Intelligent New Energy Conference, Great Wall Motors released this slogan, which made some people feel hot-blooded, some felt it was too aggressive, and some felt it was just empty talk. However, no matter how it is perceived, Great Wall Motors must present more technical knowledge and leading-edge products to break down some doubts. Regardless of how the outside world perceives it, at least from the communication with Mu Feng and Li Ruifeng, it can be seen that Great Wall Motors has indeed carried out deep thinking and is showing a different kind of "determination." Mu Feng said, "Grasping trends is more important than chasing trends!" Li Ruifeng said, "The battle for new energy in the future is not a hundred-meter race, but a ten-thousand-meter long-distance race. Only those who can endure can run far." In the final analysis, it is all about adhering to a kind of long-termism. Whoever can adhere to long-termism is most likely to run to the end. In fact, I feel a bit regretful for Great Wall Motors. Because, despite the fact that new energy sales do not correspond, Great Wall has a rich and solid new energy technology layout. Moreover, Great Wall Motors is the pioneer of the technology brand, hybrid DHT technology, and technology nameplates such as Honeycomb Energy, Hachi Dynamic Technologies, Wei Shi Energy, and Haomo Zhi Xing... are becoming more and more well-known. Of course, no matter how much regret is expressed by the outside world, Great Wall Motors needs to solve this problem on their own, and the process of solving it is the process of achieving the balance between the "impossible triangle." When looking for the balance point of the "impossible triangle," Great Wall Motors put forward an "old-fashioned but essential" viewpoint: Let the conscience of making cars return to the essence, let the integrity of making cars return to the essence, let the core technology lead the making of cars back to the essence, and let technology realize equality... This is Great Wall Motors' corporate development strategy that has been adhered to since the era of fossil fuel cars.
Mu Feng believes that, in terms of layout, after being tempered by the market for many years, Great Wall Motors' new energy layout has also reached a stage where "layout is not starting today, but reaping today". Perhaps, this statement may be slightly different from the judgment of the outside world. Facing doubts, Great Wall Motors also knows that "there is no need to argue over opinions", and discussion is useless. They must present a system of technology and specific routes to show the market where the benefits are. It must be said that the more determined Great Wall Motors is unexpected in the market as it has indeed brought some surprises. At the New Energy Technology Conference, Great Wall Motors unveiled its brand new intelligent four-wheel-drive hybrid technology, Hi4, as the latest example of Great Wall Motors' technical layout of forest ecology, and PHEV was considered the main technology route before 2025. ![Great Wall Motors' Hi-4 globally pioneering intelligent four-wheel-drive hybrid technology](https://42how-com.oss-cn-beijing.aliyuncs.com/article/image_20230321150006.png) "Hi4", H represents a hybrid system, i represents intelligent, and 4 represents a four-wheel-drive system. It contains two power systems with a system power of up to 340 kW, and it can cover A to C level models. Furthermore, it achieved three innovations in technology: a new hybrid "new configuration" with three power sources distributed on two axes, a new breakthrough in the iTVC intelligent torque vector control system, and a new height in mechanical and electrical coupling transmission systems. "Hi4" condenses the deep technical accumulation of Great Wall Motor over the years. Compared with mainstream traditional dual-motor hybrid technology, the brand-new "Hi4", which adopts the front and rear axle double-motor series and parallel electric four-wheel drive configuration, is undoubtedly highly innovative in the industry. Great Wall Motors hopes that with the support of the brand new "Hi4" technology, it can achieve "the experience of four-wheel drive, the price of two-wheel drive, the performance of four-wheel drive, and the energy consumption of two-wheel drive" in the future. By equivalently replacing two-wheel drive products, users can "afford, enjoy, save, and run long distances", and achieve "the best efficiency in all working conditions, and worry-free driving in all scenarios". ![Great Wall Motors Hi4 application can realize "the price of two-wheel drive with the experience of four-wheel drive"](https://42how-com.oss-cn-beijing.aliyuncs.com/article/image_20230321150014.png)
The new Hi4 technology
“Our system, relative to traditional dual motor two-wheel drive, increases the cost very little, allowing for true two-wheel and four-wheel drive at an affordable price.” Said Mu Feng. Consumer benefits are the starting point of everything, and through the breakthrough of the Hi4 technology, Great Wall Motors tries to solve some pain points for users during the vehicle usage process and bring new perceptions: worry-free and a brand new driving experience.
The new Hi4 technology also has an important significance; it can help Great Wall Motors improve the product’s cost-effectiveness and quality, as well as increasing the technology’s visibility. Only when the market can see it and consumers can use it is it the foundation of “let core technology lead car making back to its essence and let technology achieve equality.”
“In 2023, with the release of the new intelligent four-wheel drive hybrid technology Hi4, the goal is to achieve a yearly sales volume of 1.6 million vehicles.” Mu Feng hopes that while everyone else is lowering prices and quality, Great Wall Motors will lead the industry in carmaking, returning to its essence with core technology.
This is one of Great Wall Motors’ goals.
The biggest breakthrough
Why did Great Wall Motors put a hybrid technology at such an important position at this time? The reason is mainly twofold: one is a deep analysis of market demand, and the other is Great Wall Motors’ new energy transformation route.
In the years Great Wall Motors has been laying out electrification, although electrification has taken off, the two major pain points of range and charging still have not been completely resolved. Currently, hybrid models are still the main market demand point, and pure electric is the long-term goal; this is a judgment made by Great Wall Motors.
“When the pace of new energy takes off and the real penetration reaches a certain level, it depends on the industry scale. In any industry, given large enough scale, everyone has enough space to extend downward.” Mu Feng believes that Great Wall Motors’ new energy transformation is primarily aimed at the biggest breakthroughs in the future.
### Long-Term Development of Great Wall Motors
Great Wall Motors has four main channels for its explosion: the main brand channel, main price channel, main level channel, and main style channel. Its aim is to achieve a re-planning and renaming system for categories, brands, products, and model spectrums, which is part of the Great Wall Forest Ecological System.
In recent years, Great Wall Motors has gradually established a relatively complete forest ecological system, with the whole vehicle as the core, and a comprehensive layout of new energy and intelligent related technology industries. At present, in the new energy field, Great Wall Motors has established a development strategy of parallel hybrid, pure electric, and hydrogen energy tracks, and has accelerated the transformation of automobile electrification. In the intelligent field, it possesses the ability to self-develop a full range of perceptual hardware, data intelligence system, intelligent line control chassis, intelligent cockpit, and so on.
Those who know about the “Forest Ecological System” of Great Wall Motors are aware that the Hi4 that was released is only the tip of the iceberg. However, Great Wall Motors, which is full of technical cards, has proposed the principle of “upgrading technology rather than downgrading price, and achieving comprehensive technology open source”.
What is open source?
Mufeng explained, “The forest ecology we have built is a completely open platform. We will not hoard any technology and products that we own, and we will also open them to all industries”.
Great Wall will open its technology and ecology for two reasons: First, Great Wall Motors is confident in its technology ecological system; second, the direction Great Wall Motors has always been striving for is to hope that Chinese automobiles can truly surpass and stand on the world stage.
Now, all five brands of Great Wall Motors have a clear attitude. Since Chinese new energy vehicles have already taken the lead in the global automobile market, if they continue to win market share and sales by means of price wars, they will only win the short-term market and lose the long-term competitive dimension.
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The basis of Great Wall Motors’ efforts still lies in its products. Without good products, everything is just wishful thinking. Those who know Great Wall Motors know that this is not a company that just makes empty promises. Everything they say will be delivered.
According to the plan, four of the new energy products that will be launched this year will be electric, and seven will be hybrid. Mu Feng hopes that in each main price and main quality level range, only one star product will appear, so as to avoid two products vying for the same market.
For example, Haval’s new energy transition will use a completely separate product channel and a new product line. Plug-in hybrid products with the new Hi4 technology will use a separate product line to differentiate from the H-series and dog series of petrol vehicles.
In addition, Haval’s new energy transition will divide into two battlefields: internal and external. “Externally, it is a completely new product line with a separate product channel, targeting the new energy market with products priced above 140,000 yuan. Internally, we will fight in the oil car market priced between 80,000 and 110,000 yuan.” Mu Feng also promised that even for petrol vehicles priced below 100,000 yuan, Great Wall Motors will still make great efforts to improve products to meet the ever-increasing user demands.
“Great Wall Motors’ ecological layout did not start today, but we reap what we sow today. When we reap the benefits, we will show it on our products.” When I think of Mu Feng’s words again, I feel a solid and substantial force behind it. This is more efficient technical strength and a clearer product matrix.
Of course, Great Wall Motors knows that strategies are always phased. Adjusting corporate strategies, building a complete technology system, laying out product matrices, and linking up the entire value chain… change is endless, just like the process of solving the “impossible triangle”, it always needs new balance.
Facing the unpredictable future, Great Wall Motors has always asked itself: Does the company have a competitive advantage in terms of comprehensive competitiveness? Does it have cost advantages? Does it have a scale advantage? Does it have a leading edge in technology? Can it adhere to the essence of car manufacturing for a long time? Can it achieve technological equality?The answer is definite,
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email firstname.lastname@example.org.