China: Great Wall is an example of the local brands problems image

Great Wall Motors, China’s biggest SUV producer was just a year ago the investor’s sweetheart – with investors loving its cheap to build, cheap to sell models.

Now, although the company has constant ambitions of global sales and dominance, because its stock achieved new records, had earning margins higher than any automaker and even had top executives talking about selling more than Jeep, it’s all crumbling around them. The reason is simple and also fundamentally complex – they wanted to go upscale.

That’s because – for the second delay in a row, sales of the 200,000 yuan ($32,100) and up Haval H8, Great Wall’s first sport utility vehicle competing against foreigners like Ford’s Kuga or VW’s Tiguan hit a barrier. The company last week announced it would cease indefinitely the model’s sales because of serious quality problems.

“We believe the event indicates domestic automakers haven’t met requirements to upgrade to be a high-end vehicle maker,” wrote Vivien Chen, a Hong Kong-based analyst at Oriental Patron Financial Group. “The event definitely hurt customers’ perception of H8, and hurt company image.”

The problem is localized to just one model of a company, but it actually understates the local brands issues – China is definitely a different automotive market from the rest of the world – and the foreign brands swiftly understood that – which elevated to new heights their local sales.

Via Bloomberg