In the field of marketing, Changan Automobile is working hard to shape its brand image, just like “Reebus”. Zhu Huarong, the chairman of Changan Group, has always taken “what exists is justified” as the guideline for his actions. With nearly 40 years of experience in the automotive industry, he respects and has analyzed the intrinsic logic of change to achieve necessary adjustments and transformations.
In the business world, Xiaomi and Huawei have subverted the traditional automotive industry’s marketing rules through their own traffic platforms, making Zhu Huarong realize that if he does not follow the change, he might be eliminated. By observing Lei Jun’s press conferences and communicating with Yu Chengdong, Zhu Huarong understood that the key to winning the traffic war lies in the company’s leaders personally participating in the frontline.
On the eve of the auto show, Zhu Huarong and Wang Jun, the president of Changan Automobile, opened Weibo accounts personally, and engaged in social media marketing. They updated Weibo frequently, posting 3 to 5 posts each day, in which Zhu Huarong shared company and personal updates, while technical expert Wang Jun showcased various automotive technologies through videos. Although this approach required them to invest more energy in marketing, it brought significant benefits – users were more willing to communicate closely with them.
For Zhu Huarong, directly participating in marketing broke down the barriers of informational isolation, allowing him to hear the most direct market feedback. He believes that the battle of traffic, technology, and price symbolizes the industry’s search for a value balance point, and competition will continue until this equilibrium is found. Zhu Huarong welcomes competition and sees it as an opportunity for development, believing that the current era offers a unique chance for Chinese companies and brands to compete side by side with the world’s top brands.
Changan Automobile’s goal is to become a first-class global automotive brand by 2030, which means the company needs to reach an annual sales volume of 4 million vehicles. Changan Automobile disclosed in its 2023 financial report that the sales volume of its own brands reached 2.0978 million units, an increase of 11.91% from the previous year, accounting for more than 80% of the total sales. Changan has already established a clear development plan for its independent brand sector. Although the fuel car segment is still the company’s main source of profit, Changan Automobile, based on customer feedback, has added plug-in and extended-range technology to its Uni series to strengthen its product power.
Zhu Huarong has expressed a realistic view of the fuel car market, “Stopping the sale of fuel cars is not realistic given the current market and Chinese users’ demands, so we must also ensure excellent performance in the existing fuel car market.” On top of the fuel car business, Changan has established three new energy sub-brands: Avatr, Deep Blue, and Qiyuan. Among them, the Deep Blue brand has delivered over 200,000 vehicles since its launch two years ago. With its technological accumulation in the field of new energy, Changan has told a high-quality realization story in the consumer market. In China’s fiercely competitive new energy vehicle market, the success of the “Deep Blue” brand suggests it has already won the recognition of a large group of consumers.
Wang Jun, president of Changan Automobile, in referring to Deep Blue’s achievements, indicates that this performance has increased Changan’s boundless potential and imagination in the field of new energy. Similarly, company chairman Zhu Huarong has gained certain confidence and pointed out that the goal of becoming a world-class automobile brand may arrive before 2030. Zhu Huarong has made it clear that to accelerate this process, Changan will continue to increase investments in electrification and intelligence. In 2023, Zhu Huarong announced that the company will cumulatively invest over 150 billion yuan in the new automotive technology industry chain and build a technology innovation team of over 10,000 people.
Zhu Huarong emphasizes that Changan has always insisted on user demand as its orientation when making choices in technological development, which is the company’s and his own bottom-line principle in manufacturing cars. Specifically, he mentioned that intelligent technology in terms of safety will be fully invested in. Taking the Avita brand as an example, the smart driving system it carries is currently the most costly plan, which is equipped with a variety of hardware including 3 lidars, 6 millimeter-wave radars, 12 ultrasonic radars, and 13 cameras. This redundant design in hardware can provide users with all-around protection. He also proposed that not all technologies align with Changan’s car-making philosophy; some technologies that impose cost burdens on consumers without offering effective value will be selectively abandoned.
In response to the media’s questions about the impact of internet companies on the automotive industry, Zhu Huarong offered the following insights:
Q: How do you view the changes brought by internet companies to the automotive industry with new playstyles and logic?
A: The progress of the era means that technology constantly drives the evolution of society, industry, and consumer demand. The new automotive industry is in the midst of fierce competition as brands, products, and services are rapidly finding their place to meet user needs and evolve quickly. Another important change comes from marketing; high-level executives of Changan Automobile, including the chairman and president, participate in live broadcasts and short videos, representing a huge shift in marketing methods. Traditional marketing, by comparison, has too many limitations and needs innovation to address changes.
Q: What’s your view on the traffic war in the automotive industry?
A: The existence of traffic indicates its legitimacy. Traffic can be divided into short-term and long-term traffic. Short-term traffic can be obtained through individual IPs or the release of exciting information, which is very beneficial for product promotion. Long-term traffic requires a focus on users at the core, creating new value products and services around them. Whether it be traditional car manufacturers or ICT enterprises newly entering the industry, they should all focus on the creation and maintenance of long-term value.
From the perspective of capital costs, influenced by the global pandemic, interest rates in many countries have dropped to negative values. Taking into account various factors, the average cost of global capital may well be below 1%, and in extreme cases, it might reach 2%. In comparison, the overall return on investment of China’s automobile industry last year was about 4% through the analysis of listed company data. When there is a significant discrepancy between the cost of capital and the return on investment, the market often undergoes a series of changes. In my view, the market competition will continue for some time before the equilibrium point between capital costs and profits is reached.
Regarding the phenomenon of industry price declines, a slowdown in growth suggests signs of deceleration in new energy market sales. Looking at the domestic market, the production and sales volume of automobiles has already exceeded thirty million units. After previous high-speed growth, the market demand is gradually being met, so the slowdown is actually a normal market performance. After the market matures, it cannot continue the past yearly doubling growth.
As for the price reduction at the sales end, most of it originates from pressure on the supply chain. At the industrial ecology level, whether continuous price wars will hinder the healthy development of China’s automobile market? This can be analyzed in two aspects: first, in the automotive industry, parts enterprises often perform stronger than the whole vehicle enterprises; second, market competition follows the principle of interest-driven. If partners are in difficulty, the main manufacturers usually feel the urgency and provide capital and management support. Therefore, sustained market competition can help find a balance point of value. For instance, if certain parts submarkets are highly profitable, it is often the result of a lack of sufficient competition.
Speaking of the issue of Changan Automobile’s decision-making chain, Changan, as a state-owned enterprise holding listed company, performs well in decision-making efficiency and investment efficiency. By passing through the board of directors and empowering the management team, the decision-making chain is significantly shortened, ensuring a highly efficient and rapid decision-making process.
Speaking of technical issues, Zhu Huarong pointed out that one should not merely pursue the technology itself, but should focus on whether the technology can bring actual value to consumers. Changan Group has five major brands under its umbrella, with fuel vehicles still being the main source of the company’s profits. Changan’s existing fuel vehicle brands are not only launching new energy products such as plug-in hybrids and range-extended electric vehicles but will also continue to develop in the commercial vehicle field. Currently, there is considerable potential in the global market, and the demand for fuel vehicles still exists. Therefore, Changan remains optimistic about the future of fuel vehicles and is increasing investments in potentially promising brands among new mainstream consumer groups, such as Changan Oshan, Deep Blue Automobile, and Avatr, which is in cooperation with CATL and Huawei.
When addressing the question of pricing adjustments for intelligent driving solutions, Zhu Huarong emphasized that technological costs are directly linked to its reliability and safety. He specifically mentioned the intelligent driving system used in the AVITA developed by Changan in cooperation with Huawei as an example, pointing out the truth of “you get what you pay for.”
On the road to future automotive technology, a costlier path has been chosen, incorporating a series of high-end detection equipment: integrating 3 LiDARs, 6 millimeter-wave radars, 12 ultrasonic radars, and 13 cameras, to comprehensively monitor the vehicle’s surroundings. The application of multiple LiDARs, for example, enables 360-degree coverage and effectively includes the traffic obstacles on both sides of the vehicle within the monitoring range, even if some believe such a configuration lacks broad practicality. In fact, given the uncertainty of real-world road conditions, such comprehensive protection holds significant value.
In terms of strategic layout for new energy vehicles, Changan Automobile has taken a unique angle. Wang Jun pointed out that Changan does not differentiate its products by low and high performance, but rather categorizes them based on the needs and values of consumers. He stressed that Changan, as a customer-oriented enterprise, aims to solve problems through technology, and if a technology would only add to costs with consumers ultimately shouldering the burden, this would not be a healthy manufacturing philosophy. Therefore, Changan has not categorized by performance but seeks the best solution.
Referring to Deep Blue Automobile’s achievement of nearly 200,000 users, Wang Jun expressed that this signifies Deep Blue has reached a clear and definite stage in its dynamic market positioning, which is in some ways even more important than sales volume. To cope with market changes, Deep Blue continues to innovate, including in areas such as channel pricing and providing more professional services, like home delivery test drives and the convenience of ordering with one click through an app. Deep Blue is currently expanding its product line to meet a broader range of consumer needs. This year, Deep Blue will release three new products, including the upcoming Deep Blue 318 and the standby C857 model.
Zhu Huarong shared his views on the changes in the assessment of state-owned enterprises by the State-owned Assets Supervision and Administration Commission of the State Council. He believed that these changes represent progress and focus on strategic technology and development. For state-owned enterprises, this means they can better balance strategic coherence with current business operations. He believes that it is inappropriate to pursue profits while ignoring long-term company development. Especially during the current new technologies and various transformation processes, high investments are essential, and he views this as a wise decision.
Zhu Huarong also mentioned Changan Automobile’s future ambitions. Changan aims to enter the world-class automobile brand category by 2030 and hopes to join the TOP 10 of independent brands with 4 million units sold. He believes that Changan may achieve this goal ahead of schedule, which not only depends on the number of products but also on a comprehensive improvement in brand value, system capabilities, internationalization, and talent structure.
Faced with the prospects of China’s new energy vehicle market, Zhu Huarong sees more opportunities than challenges. He believes that China has a tremendous advantage in the new energy sector, providing an excellent environment for the development of the automobile industry.
Since the year 2000, China has actively started to lay out the transformation and upgrade of the new energy industry. After nearly two decades of effort, under the joint promotion of national industrial policies and local practices, an environment favorable to the rapid development of the new energy industry has been formed. Especially after 2020, as the Chinese market rapidly shifted from fuel vehicles to electric vehicles, the production and sales volume approached an astonishing figure of nearly ten million units last year. Such a massive market scale provides strong support for the cost reduction and mass production of the industrial chain, accelerating its growth.
In the process of electrification of new energy vehicles, Changan Automobile continuously innovates and has recently introduced integrated new technologies for plug-in and range-extended electric vehicles. The speed of technological advancement is very fast, with a competitive edge particularly evident in the field of hybrid technology. China also stands out in the large-scale application of intelligent technologies, with rapid improvements in development and design capabilities, offering Chinese enterprises and brands a rare development opportunity. We are now at an era where Chinese brands can match or even surpass the world’s top brands.
In response to the challenges faced by the industry, including addressing the limitations, usage efficiency, environmental adaptability, and safety issues of battery technology, the next generation of battery research and development will surely enter a new stage of material innovation. Although price wars are intense at present, they may actually be beneficial in the long run. The great opportunities for the Chinese automobile industry outweigh the challenges and for brand growth, it is the best of times.
Facing the strategic changes made by multinational corporations towards China’s development, companies choose different approaches based on their own scale, operating conditions, and market strategy. Some groups maintain autonomous control over platform development, technological innovation, and global integration, while others collaborate with Chinese businesses through shareholding or acquisitions to address potential financial challenges. Adapting to the needs of the market, companies will carefully study and select strategies that suit them.
Regarding the current “overcapacity argument” from the West concerning China’s new energy vehicle and power battery industry, I believe that moderate overcapacity is beneficial for advancing the industry and creating value for consumers and society, in line with the principles of market economy operation. Even if competition is fierce, as shown by the phenomenon of “market curling,” it is a normal occurrence in the market economy. Intense competition will help the industry return to the track of healthy competition, allowing superior enterprises to stand out. Our own value judgments will also be upheld in competition, striving to create greater value for users.
