Great Wall pursues high-margin strategy with fuel-efficient cars

PUBLISHED : Thursday, 13 March, 2008, 12:00am
UPDATED : Thursday, 13 March, 2008, 12:00am

Great Wall Motor plans to roll out fuel-efficient car models this year and its first plug-in hybrid vehicle by 2010 partly as a way to increase profit margins, top executives said.

'We hope sales of these cars will count for more than 50 per cent of overall business this year,' deputy general manager Bai Xuefei said.

The company, which announced its annual results on Tuesday, said the implementation of consumption tax in April 2006 had affected its profit margin.

But higher-margin products - such as its 2.5-litre diesel engine sports utility vehicle - will improve profitability in the future, it said.

Great Wall did not disclose sales or production volume targets for its fuel-efficient cars, but the company said its plug-in hybrid - a combination petrol and battery-powered vehicle - would be sold domestically and abroad.

Other local carmakers, such as Chongqing Changan Automobile, Guangzhou Automotive Industry Corp and SAIC Motor Corp, are also planning to launch fuel efficient models.

Great Wall did not disclose its target sales for this year. But chairman Wei Jianjun estimate the company's exports would grow 72.6 per cent this year to 80,000 units.

'We're not chasing sales volume, but profitability will be the main target for the company,' he said.

Mr Wei said countries around the Persian Gulf, as well as Russia and Latin and South America, would be the three largest export markets for Great Wall in five years. 'But eventually we hope to land our cars in western Europe and North America,' he said.

The company posted a 33.3 per cent increase in net profit to 937 million yuan last year but its gross profit margin decreased 1.4 percentage points to 23.7 per cent.

Last year, its higher margin models, the Hover SUV, accounted for 35 per cent of overall business, up from 26 per cent in 2006.

Great Wall also has introduced its own passenger car, the Jingling. Mr Wei said sales of the Jingling would be at least 60,000 units this year. The company will spend 1.5 billion yuan this year on its component business, as well as research and development.

A JP Morgan report estimated that Great Wall's earnings would grow 31 per cent this year, driven by a 55 per cent rise in sales volume to 166,800 vehicles.

Shares of the company closed 0.13 per cent higher yesterday at HK$8.01.