China EV maker betting on cult status to sell a million cars

Bloomberg news | The Detroit News

Since last July, a little-known automaker in southwest China has been dominating the world's largest electric car market, selling a tiny, bare electric vehicle starting at $ 4,500 to major vendors and even Tesla Inc. almost every month.

The Hong Guang Mini is the brainchild of SAIC-GM-Wuling Automobile Co., a joint venture between SAIC Motor Corp. and Guangxi Automobile Group Co., two state-sponsored automakers, and U.S. giant General Motors Co.

The company, based in the city of Liuzhou, known for its limestone mountains and river snail soup, sold around 270,000 of the cars in nine months, making it the best-selling electric vehicle in China - and has even greater ambitions for the future. The company is targeting annual sales of 1.2 million vehicles over the next year, almost the number of electric vehicles China's automakers will produce together in 2020.

It's an eyebrow-raising destination, but even before the Hong Guang Mini, Wuling had a track record of winning in a market that is defining the new era of driving. The Sino-American JV was founded in 2002 and built its business selling microvans: dependable workhorses with sliding doors, nicknamed “bread boxes” in Mandarin, and China's best-selling passenger cars in 2017 were roads used by contractors and delivery drivers alike.

The buyers of these gas-guzzling gray vans are almost exclusively male, which makes Wuling's hub for the Hong Guang Mini - which has a top speed of 100 km / h and 12-inch wheels - all the more extraordinary. Shortly after its debut last July, the automaker realized the vehicle was gaining a following among young women, a phenomenon it drew on with an approach that twisted conventional wisdom about selling cars.

"The mentality of our company is to produce everything that people need," said Wuling's director of branding and marketing, Zhang Yiqin, in an interview. “We keep an eye on our users. The hurdles for the introduction of electric cars can only be overcome if the consumers perceive the use as pleasant. "

To this end, Zhang has staffed his team with people who understand Hong Guang Mini's customer base, around two-thirds of whom are now female. At 35, he jokes that he is the group's senior statesman, whose age averages around 27. Slogans like 'Young and Eager' are sprayed across the walls of Wuling's headquarters in Liuzhou, a city that, alongside the company with 30% of all car sales, relies on electric vehicles, which is the highest rate in China last year, according to WAYS Information Technology.

Wuling's success with the Hong Guang Mini was fueled by a targeted marketing campaign that was conducted almost entirely online, according to Zhang. His team often communicates directly with consumers through various social media platforms, and it was a customer request for more hues that led the company to develop the latest version of Hongguang Mini - the Macaron. It's available in avocado green, lemon yellow, and white peach pink, with an optional monochrome roof as a contrast to mimic the vanilla buttercream that includes the French meringue confections of the same name.

In doing so, they also landed on one of the car's most important selling points - besides the rock bottom price: Hong Guang Mini drivers can customize their vehicles in ways that are not possible elsewhere.

"Stickers" can be used to change the car's panels and body. Some wear the Nike swoosh, others have galaxy-like space scenes and other cartoon characters from Hello Kitty and Doraemon. The original Hong Guang Mini comes in around 20 different base colors that can be toggled, and buyers can customize the interior too.

Zorah Zhang (not related) is a typical customer. The 23-year-old is a fan of Hayao Miyazaki, the Japanese animator who directed My Neighbor Totoro, a fantasy film starring a character named The Catbus, a grinning cat whose seats are covered in fur.

She pimped her Hong Guang Mini to look like it and is spending around $ 2,300 to clad the interior of the car in brown velvet and cover the roof with lights that twinkle at night.

“A lot of my friends have the Mini, you can see them all over Liuzhou,” says Zhang, who lives with her parents (they drive a BMW sedan). “I love things that reflect my character. I can change the look of the car again if I think of other things. "

As reckless as it may seem to turn a wheel set into a fashion accessory, there is a very real market to be won.

Outside of Liuzhou, the electric vehicle penetration in China is still only around 6% and competition is fierce. Tesla may be the loudest name in bigger cities like Beijing and Shanghai, where its first Gigafactory is located, but a variety of newer local vendors from Nio Inc. to Xpeng Inc., Li Auto Inc. and WM Motor are intruding.

At the same time, other local players like BYD Co., an automaker long endorsed by Warren Buffett, are stepping up their EV game, and international giants like Volkswagen AG are investing billions of dollars in new electric lineups.

Since consumers in China are faced with a choice when fossil fuel cars are added, automakers must give drivers what they need to survive, said Jochen Siebert, managing director of consulting firm JSC Automotive in Singapore.

"SAIC-GM-Wuling has to constantly develop new ideas in order to attract consumers," said Siebert. The Hong Guang Mini is “a kind of accessory, a fashion item that could go out of style sooner or later”.

For now, it's a strategy that is paying off for Wuling. The company, which is 50.1% owned by Shanghai-based SAIC, 44% of GM's China unit and 5.9% of Guangxi Automobile, sold a total of 1.6 million vehicles last year. While this was down about 4% from 2019 amid the pandemic, sales of Wuling's new vehicles nearly tripled to 174,000 units.

For GM - which under Chief Executive Officer Mary Barra is increasingly focusing on electrification and autonomous driving - the Hong Guang Mini seems to have been a blessing. The automaker posted $ 9.9 billion in revenue from its Chinese auto joint ventures in its first quarter results last month, up from $ 4.3 billion in the first three months of 2020. GM, which has several other partnerships in China, breaks Wuling's earnings in its financial results.

While loyalty is what made the Hong Guang Mini stand out, cost was the main driver behind its blockbuster sales in a country where many find the sticker price of a Tesla Model 3, which sells for the equivalent of $ 39,300, unreachable. The simple Hongguang Mini starts at $ 4,500, and even the new Macaron sells for under $ 6,000.

Among other things, Wuling was able to produce cheap cars thanks to its good supply chain management, which was refined with the extremely popular microvans. Many of Wuling's suppliers have also set up manufacturing facilities in Liuzhou, which has helped to further reduce costs. It's a model replicated by auto companies in other cities and provinces across China, flattering to Wuling, but also challenging as the prices of rivals' cars come down.

The global semiconductor shortage also weighs on Wuling, with the Hong Guang Mini, although a simple electric vehicle, still requires over 100 chips. Hongguang Mini production was impacted by the shortage, with macaron production expected to decline by around 15% in May, according to Zhang.

The high sales target for 2022 is the cornerstone of Wuling's plan to maintain its market-leading momentum. After premiering a convertible Hong Guang Mini at the Shanghai Auto Show in April, the company is aiming to bring out a mid-cycle improvement on the vehicle later this year and is working on a two-seat electric vehicle for younger men, Zhang said.

At a Wuling retailer in downtown Liuzhou, user experience manager Li Zhengguang says that a four-person team is solely focused on new media. You communicate with potential customers through Douyin, as TikTok is known in China, and Little Red Book, a trusted social shopping platform popular with young women that shares photos and videos. Li, who used to sell diamond engagement rings, says there isn't much of a difference between jewelry and automobiles. Create a desire for a cool product and buyers will come, he says.

It is brilliant not to present the Hong Guang Mini as a cheap car, but as a coveted accessory in brand-conscious China, said Siebert from JSC Automotive.

"It has become a trademark of SAIC-GM-Wuling over the past 20 years to keep surprising the market and itself," he said. “They did very well because they focused on the right things. About the quality when they were mainly making microvans and now marketing. "

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