Chapter 439 – How do we sell cars?
Songjiang Motors had already developed 3 categories of vehicles with a total of 6 models. The 3 classes were named as Olympic, Red Star, and Off-road. The production had just started. As this was still in the starting phase, the output was not high, and the two new branch factories had only produced less than 1,000 vehicles for all 3 categories.
In China, the rest of the automobile enterprises knew that Bing City’s Machinery Company will be introducing their cars soon and will be focusing on small vehicles. All of them felt that this was a joke.
A company that manufactures tractors and motorcycles want to produce saloon cars?
Bing City’s Machinery Company was one of the top company in China for their tractors and motorcycles. With their sales and the quality of their products, they might even be the best in China.
But automobiles? Even if China’s automobile industry was already matured, there were still many other established brands in the market. Songjiang Motors will have no chance to get a slice of this cake.
We are all using the advanced technologies from Germany, the US, and Japan. The production lines were also imported from overseas, and their experts were stationed here to give us guidance. What does Songjiang Motors have?
What? They had hired Soviet Union’s automobile engineers?
What a joke. Since when did the Soviet Union produce good cars? The Soviet Union’s cars were noisy, ugly and old fashion, and it was not comfortable to drive. In the recent few years, even China does not import these Soviet cars. Oh, it’s the former Soviet Union.
The company that was most eager to see the Machinery Company fail was First Automobile Works in Jilin.
Bing City’s Machinery Company had poached many staffs from them. Many of these staffs were from the technical department. FAW can still clearly remember how the Machinery Company set up recruitment booth outside their premises!
FAW wants to see how the consumers ignore the Machinery Company’s cars and the Machinery Company had no choice but to sell off their factories and equipment. When that happens, they will buy over one or two factories to expand FAW. At the same time, they will poach all the staffs from the Machinery Company. Not only they will steal the technicians and experienced workers. Even those ordinary workers will be targeted. They want the Machinery Company to have no workers!
When everybody does not think Songjiang Motors will succeed, Feng Yu, Fu Guangzheng and the rest were feeling confident. They had tested those 6 models of vehicles. The price ranges from 120,000 RMB to 500,000 RMB. There was even a model of Diesel Off-road vehicle. Currently, in China, there were no other off-road vehicles that run on diesel.
But marketing these vehicles was the biggest headache for them.
Fu Guangzheng wanted to place advertisements on all media, especially CCTV. He also wanted to hire celebrities to endorse their cars. It would be best to organize a grand motor show. This will increase brand awareness.
The impression of Songjiang Motors among Chinese consumers were motorcycles. Most of the consumers will not dare to purchase their vehicles if they introduce their cars into the market. After all, there were other options like imported vehicles and domestic joint venture vehicles. These vehicles were of high quality and have after sales services. The Machinery Company does not have these.
Feng Yu had asked his men to do a rough estimation of the cost of setting up servicing centers in all provinces. It will cost over 100 million RMB! Unless Feng Yu could set up the service centers like the 4S shops of the future years, and charges higher than the market rates, he would not make money. He will even be making a loss.
But if there were no after-sales services, the consumers will get the impression of the company does not care about the after sales services and they will not be interested in their cars.
Also, the prices for their vehicles were too high, those motorcycle distributors do not have the ability to be the authorized retailers of these cars. Even if they were to bring in 2 vehicles for every model, it would cost them at least 2 million RMB. But as a retailer, how can they only bring in so few cars? They still have to bear the cost of rentals, wages, etc. It was tough for those distributors to incur all these costs.
Feng Yu had thought of all these problems before. His solution was to supply the cars to those long-time distributors first, and they were only required to place a 1 million deposit. But the sales proceeds of the vehicles have to be deposited into Tai Hua Trading’s account. Tai Hua Trading will then settle the payments with the distributors. This was the sales model of those 4S shops.
Bing City’s Machinery Company will also station a mechanic at every shop. The shops will need to hire two mechanics themselves. This should be sufficient for the time being. Songjiang Motors’ vehicles were still very durable.
This will form the basic structure of the 4S shops model from Feng Yu’s previous life. But this will also cause the Machinery factories to be locked up. There will be a considerable strain on the company’s finance. Once the sales were not good, the Machinery Company will face cash flow problems. If this problem persisted, the vehicles’ production might come to a halt.
But if the sales of the cars were good, this will create a sales distribution network fast and will increase the sales volume. Also, this will be easier than setting up retail shops themselves.
Li Mingde opposed to this solution. Look at First Automobile Works, Second Automobile Works, and the rest of China’s automobile manufacturers. All of them have their own showrooms and sells all their vehicles by themselves. You are letting those distributors holding on to our cars. What if they disappear with our cars? With only 1 million RMB as a deposit, and you are allowing them to hold on to dozens of our vehicles? The cost of those vehicles was more than 2 million RMB. This was too high risk.
Li Mingde had opposed to Feng Yu’s plans initially. China’s automobile market was not a big market, and Feng Yu’s plan was too large scale.
Although there were only two branch factories in operation, the construction for the rest of the factories was almost completing. The constructions will be completed early next year and will start productions. What if the vehicles’ sales were not doing well?
Feng Yu smiled. He still has a second sales strategy which was the salesmen model.
In the US, door-to-door sales was a common sales model. A good salesman can earn as much as the top executives in those enterprises. The salesmen do not need to stock up on the goods. They only need to bring their clients to the factories to look at the products. It will be up to the clients to decide whether if they want to buy.
Of course, Feng Yu was not asking his salesmen to go to ordinary households to sell his cars. He wants them to visit all the government and government-related agencies.
If Feng Yu remembered correctly, next year would be the year that China’s government increases their spending on cars. The Deputy Division head level officials were assigned a personal vehicle. In some regions, even the Section Head level got their own car!
There were many reasons for this. One of the reason was the government’s 5-year plan. The officials need to attract foreign investors and foreign investments in their area will affect their chances of promotion. Another reason, there was a sudden increase in the domestic production of automobiles. These were those joint-ventured automobile companies’ vehicles. The sudden increase caused the car prices to drop and at the same, the Chinese government’s revenue increases. Many of the officials felt that it was the time to increase their benefits and welfare.
This was Songjiang Motors’ opportunity to increase their brand awareness. Feng Yu had taken part in the design of the 6 models. He told Michael Liu how he wanted the vehicles to look like and Michael Liu and his team came out with the final design.
The 3 categories of vehicles were the traditional small saloon cars (Olympic), Luxury (Red Star) and SUV (Off-road).
The competitor for Songjiang Motors’ small saloon cars was the Santana. The SUV’s competitors were Jeep and Cherokee. The luxury cars’ competitors were Mercedes and Audi!
Because of the sales of their vehicles, Feng Yu and Fu Guangzheng start to look for those officials that were close to them. They want to sell their cars to these top officials first, and their subordinates will tend to follow their leaders.
Feng Yu had picked CCTV as his first stop!
Translator’s notes: Information about First Automobile Works (FAW) can be found here. Second Automobile Works had changed their name to Dongfeng Motors. The information about Dongfeng Motors can be found here.
4S stands for sales, service, spare parts and surveys.
Below are the links in case the links above do not work.