Author: Zheng Senhong
“Internally, we are also reflecting on the fact that the Great Wall’s new energy vehicles have not completely entered the minds of consumers. The first big move in 2023 is to change the sign of heavy fuel consumption in Great Wall fuel vehicles,” said Fu Xiaokang, Vice President of Great Wall Motors, frankly to the media at the Great Wall Motors Intelligent New Energy Conference on March 10.
In 2023, how will “the road of new energy” of Great Wall Motors go?
At this communication meeting, Great Wall revealed two key pieces of information:
- Seize the main track of the hybrid market and return to a major brand of Great Wall;
- Enhance the presence of Great Wall Motors in the field of new energy by exporting the mother brand’s technologies to its subsidiaries.
Whether this self-revolution can bring practical results may be glimpsed from two directions: Great Wall technology and market strategy.
Betting on the Hybrid Track, Great Wall Begins to Eat BYD’s Set-up
In 2022, a major shift in the Chinese auto market is that:
On the premise of slight growth in the overall market, new energy vehicle models have made a big play for the fuel vehicle market and have all achieved results.
Geely’s performance can attest to this shift- in 2022, Geely’s new energy vehicles sold a total of 328,000 units, with a penetration rate of nearly 23%. In contrast, Great Wall Motors sold only 131,800 new energy vehicles throughout the year, with a penetration rate of only 13.2%.
However, this does not mean that Great Wall’s transformation efforts are weaker than those of other automakers. For example, in the face of the rapidly growing hybrid market, Great Wall Motors has its sights set on the prize.
With Geely, Changan, and Chery successively launching hybrid products, Great Wall Motors quickly put the “Lemon Hybrid DHT Technology” platform into mass production.
Technically, Great Wall’s hybrid technology is not inferior to BYD DM, but cost control is still a weakness of the Lemon DHT.
Take the Haval H6 plug-in hybrid, which starts at 159,800 yuan, as an example. As last year’s compact SUV sales champion, the BYD Song PULS DM-i has since lowered its price to 154,800 yuan.
For products in the 100-200,000 yuan range, most consumers do not have brand loyalty. Their core considerations for comparing and purchasing products are configuration parameters and cost-effectiveness. “A 5,000-yuan difference is enough to make everyone change their mind.”“`
Reflecting sales-wise, the annual sales volume of 3 models and 6 products under the Great Wall Haval brand was 36,381, which was less than the monthly sales volume of 41,555 of the BYD Song PLUS DM-i in December of last year.
Cost control has always been the core advantage of BYD’s hybrid technology, and that is also the reason why BYD swept the mainstream segmentation market in a flash.
In the face of BYD, how to go head-to-head with it in the hybrid market, Great Wall Motors cannot ignore the word “cost-effectiveness“.
On March 10th, Great Wall Motor released the new intelligent four-wheel-drive hybrid technology Hi4 in an attempt to upgrade its hybrid technology to fight against BYD’s cost advantage.
According to official introduction:
- Hi4 includes two powertrains (different from vehicle positioning). The system power can reach 340 kW, covering A-C level models.
- The core components of the technology module are two hybrid-specific engines of 1.5L/1.5T, which achieve electric four-wheel-drive through the series-parallel connection of front and rear dual motors. It can achieve a maximum of 41.5% thermal efficiency and reduce fuel consumption by 6%-7%.
In one sentence:
With the energy consumption and price of two-wheel drive, the performance and experience of four-wheel drive can be achieved. This is the trump card for Great Wall and BYD DM-i hybrid technology against each other.
“We not only want to build a new energy of Great Wall, but also become the Great Wall of new energy.” At the press conference, Great Wall Motors announced that it will “build a wall of new energy” and the Hi4 new intelligent four-wheel-drive hybrid technology is its most important card.
Liu Bao, Vice President of the Great Wall Automotive Technology Center, believes that in the past, the energy consumption and cost of four-wheel-drive vehicles compared with two-wheel drive vehicles have increased, and the prices of four-wheel-drive vehicles on the market are generally 8,000-10,000 yuan more expensive than two-wheel drive vehicles.
Great Wall plans to fully popularize four-wheel drive in all new energy products by 2024.
“`Theoretically, the Great Wall H4 utilizes a unique technological approach that provides fuel economy while also reducing the cost of its hybrid four-wheel-drive structure. However, for most consumers, is four-wheel drive performance an essential factor when purchasing a car?
This may be where BYD finds the answer.
BYD’s DM technology has gone through four iterations, with DM3 (2018) focusing mainly on performance. However, the first-generation BYD Tang DM, which completed its first full year in 2019, sold an average of less than 3,000 units per month.
In 2020, BYD used DM-i powerful hybrid technology to challenge traditional fuel-powered vehicles in the same price range. In its first full year of availability (2021), its hybrid vehicles sold a total of 273,900 units, a more than four-fold increase over the previous year. DM-i models accounted for 78% of those sales.
The market has shown that most consumers choose a hybrid vehicle in order to achieve both the affordability of a fuel-powered car and the fuel economy of a hybrid vehicle. This has resulted in a “trilemma” of performance, energy consumption, and price for hybrid vehicles. After all, the price of BYD’s DM-p is about 50,000 yuan higher than that of the DM-i.
In comparison, Great Wall H4’s basic skills are on par with DM-i’s fuel economy, and it has a killer feature in the form of a four-wheel-drive system that provides performance and safety that front-wheel drive vehicles cannot match, all at the same price as two-wheel drive vehicles.
Looking at the Chinese automobile market as a whole, BYD has already executed a deep tie-in with hybrids, with the equation “buying a hybrid car equals buying a BYD” becoming a mainstream way of thinking. No competitor can compete head-on with BYD’s DM-i/DM-p.
Rather than engaging in a brutal price war, Great Wall should initiate a differentiation competition, comparing performance with two-wheel drive and energy consumption with four-wheel drive. This energy-saving-based four-wheel-drive hybrid system is evidently a blank subdivided market. However, using this technology effectively is a major challenge for Great Wall’s automotive business.
Multi-brand internal competition destroys “a Great Wall”
Looking back at the history of Great Wall’s development, their product strategy has always been confusing.
Great Wall Automotive, which once “all in” on SUVs, not only did not concentrate on electric vehicles but instead chose to divide its attention in six areas.
- In the 50,000-300,000 yuan low-end market, Haval, Great Wall Cannon, and Euler are respectively positioned in the SUV high-end market, pickup truck market, and women’s consumer market;
- In the 200,000-500,000 yuan mid-to-high-end market, Tank and Salon are respectively positioned in the off-road market and the mecha market;
- In the 150,000-400,000 yuan SUV high-end market, WEY, as a new energy vehicle platform, tries to compete in the high-end new energy vehicle market.
By comparison, Geely has formed a low/mid/high three clearly defined market positioning with Geometry, Yinhe, and Zeekr models. Meanwhile, Chery has been shrinking the number of its brands, while BYD continues to focus on its brand. Only Great Wall keeps innovating its product categories and attacks the market with a large quantity of products.
However, the reality is that the differentiated positioning of Tank and Salon is in the niche market with a very low ceiling. The hardcore off-road market where Tank brand belongs to has always been at the level of only two-digit thousands in terms of sales volume, while Euler focuses on a single female consumer group. Wei, on the other hand, has long deviated from the mainstream price range.
An industry veteran once defined Great Wall’s product and brand strategy in a straightforward manner: category-driven.
For example, the “Shenche” H6 created the category of Chinese household compact SUV priced at 100,000 yuan, and Great Wall subsequently launched a series of nested compact SUVs. Moreover, after Tank 300 created the category of 200,000 yuan compact hardcore off-road SUV, it was rebranded as “Tank” brand and became an independent brand.
The most important thing for deep-cultivating a brand is strategic determination. However, Great Wall’s brand strategy has deviated from the right path in this regard.
Regardless of the organizational restructuring of “strong back office, big middle office, and small front office”, the so-called “forest ecology”, or the strategic route of returning to “One Great Wall”, Great Wall has not been able to provide a clear direction.
After being verified by the market, Great Wall also became aware of its own problems.
In December 2022, Great Wall carried out integration of its six major brands and formed a “5-4-1” integrated management model, attempting to use a systematic approach to create a combination of new energy products.
- 5 represents brand, channel, user, data and sales service platform;
- 4 represents four operational groups, namely Wei Pai + tank operational group, Euler + salon operational group, Haval + pickup operational group, and overseas market operational group;
- 1 emphasizes the concept of unity in action, management, and voice for Great Wall.
In the words of Mu Feng, the CEO of Great Wall Motors, the company’s product layout will return to four main channels: main category, main price, main level, and main style. Only one star product will appear in each main price range and main level range, and two products will not be released simultaneously to compete in the same field.
As for specific brands:
- Haval will establish an independent new energy product line to avoid being dragged down by the fuel version;
- Wei Pai will focus on two main products: the Blue Mountain DHT-PHEV and the new energy MPV that will be released soon;
- Tank brand will not only improve the Tank 300 and Tank 500 PHEV models, but also release a new product this year;
- Euler, in addition to consolidating the market layout of Good Cat and Lightning Cat, will also collaborate with Salon to achieve full coverage of pure electric products at different levels on the product level.
Li Ruifeng, the chief growth officer of Great Wall Motors, revealed that:
In late March, Haval will launch two flagship models, the B07 and A07. This year, it plans to launch seven new energy products, including EV models and PHEV models. Haval’s independent network is also accelerating construction, and the terminal dealers will have an independent dealer team as the main operator. The Haval brand will support the main strategy of Great Wall Motors’ transformation.
“Haval’s new energy transformation will have two battlefields, internal and external. The external battlefield will cover the market with a completely independent product channel and a brand new product line, targeting markets with more than 140,000. The traditional 80,000 to 110,000 oil vehicle market will be fought with the internal battlefield,” Mu Feng added.
For the current predicament of Great Wall Motors, brand integration, focus, and subtraction are undoubtedly the best solution for self-help. After all, it is not easy for an automobile company with an annual sales volume of less than one million vehicles to operate six independent brands, let alone whether a multi-brand strategy can help Great Wall Motors branch out in multiple areas.“`
Despite the fact that more refined brand positioning can more accurately control the market, the Great Wall Motors’ approach of “better to kill the wrong person than to let them go” seems too hasty.
Looking at it now, it seems difficult for Haval to return to the SUV market king under the crushing of the BYD Song PLUS series, while Weipaishan, positioned as a family car, and MPVs cannot avoid comparison with various new forces. As for how Salon can maintain its market share in the high-end market after a mute year and what changes it has experienced, these are still tests for Great Wall Motors.
Great Wall Motors, which does not make sedans and focuses on SUVs, has already revealed the risks of “walking on one leg” under the strong offensive of BYD. After missing out on the bonus of the plug-in hybrid market, Haval undoubtedly bears the sales support for Great Wall Motors’ transformation in 2023.
Great Wall’s 2023 and 2025
For the competition in 2023, Great Wall Motors has made a forecast – the annual target sales volume will not only be lowered to 1.6 million vehicles, but the profit will also be lowered to 6 billion yuan – 2 billion yuan less than 2022’s profit.
According to data from the China Passenger Car Association, Great Wall sold a cumulative total of 1.0675 million vehicles in 2022, a year-on-year decrease of 16.6%, and the year-on-year growth rate of domestic passenger car retail sales in the whole year increased by 1.9%, making it the company with the largest decline in sales among the top 15 companies.
It can be seen that Great Wall’s goal this year is to pursue a larger share of the new energy market and consolidate its footing. Hi4 will be an important means to achieve this goal, and it is also an opportunity to catch up with BYD.
In terms of products, the Hi4 hybrid system may be able to solve Haval’s sales problems, but it is difficult to solve Great Wall’s “new energy anxiety”. After all, in Great Wall’s positioning, Haval still faces the low- to medium-end market, while truly demonstrating new energy technology still depends on high-end brands.
Weipaishan and Salon have been undertaking Great Wall Motors’ mission to impact the high-end market, but the former still performs mediocrely under the blessings of intelligence, and the latter is still in the exploration stage.
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Therefore, the primary goal of Great Wall Motors is still to create a truly high-end explosive model.
In 2022, Wei Jianjun presented Great Wall Motor’s five-year plan to the public–to achieve a global automobile sales volume of 4 million units and a revenue of over 600 billion yuan, with new energy automobiles accounting for 80\% by 2025.
One year has passed since the five-year plan, and Great Wall Motors still faces the problem of not having enough outstanding brands in the new and old markets. They have not achieved many remarkable results in the new energy market either. Looking back on the first two months of this year, Great Wall Motors are still in a decline.
According to the data of the China Association of Automobile Manufacturers, Great Wall Motors sold 68,200 vehicles in February, a year-on-year decrease of 3.65\%.
In terms of specific models, the Wei brand had the largest year-on-year decrease with 75.81\%. Euler’s brand had a decrease of 28.53\%, while Great Wall’s pickups became the only growing model, with an increase of 47.43\%.
Combining Great Wall Motor’s sales volume of 61,500 vehicles in January, it means that they have sold a total of 129,700 vehicles in the first two months of the year, a year-on-year decrease of 28.94\%.
Undoubtedly, this year will be a challenging year for Great Wall Motors.
On the one hand, the curtain of price war has fallen in the industry, from the historically lowest price of Tesla at the beginning of the year to the pressure exerted by new car-making forces on the entire Chinese automobile market. Currently, at least 30 automotive brands are involved in this vortex of large price reduction.
On the other hand, competition among automotive companies has shifted from single-product and technological competition to all-around brand competition. Traditional car companies and new car-making forces, among others, will launch new products on a large scale this year to compete for market share.
From SUVs to new energy vehicles, Great Wall Motors, which is good at finding opportunities, is more like a sprint athlete with strong explosive force. However, in the automotive industry, long-distance runners with greater endurance and ability to go further will eventually be winners.
How to change the product structure, fully embrace new energy, and seize the next stage of thinking for Great Wall Motors.
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.