Author | Wang Xiaojuan

Editor | Zhou Zhiyu

The recent Great Wall Motor Company can be described as being in full swing. At a time when the price war in the car market has begun and the profit margins of most car companies have been further reduced, Great Wall Motor's revenue and net profit have exploded.

At the Chengdu Auto Show on August 30, Great Wall Motor Chief Growth Officer (CGO) Li Ruifeng talked about the business situation in the first half of the year, and it was hard to hide his excitement. Earlier, Li Ruifeng joked about Wall Street news that as a CGO, his top priority was to make the group grow and make a profit. He has also done a good job over the past year or so.

Li Ruifeng also said in a conversation with Wall Street News that in the first half of the year, Great Wall's net profit reached 7 billion, which is also a good result for the car industry.

According to data, in the first half of this year, Great Wall Motor sold a total of 0.555 million cars, achieving revenue of 91.429 billion yuan, an increase of 30.67% over the previous year, and this has been growing for 4 consecutive years; net profit reached 7.079 billion yuan, an increase of 419.99% year on year; net profit after deducting non-return to mother was 5.651 billion yuan, an increase of 654.04% year on year.

According to Li Ruifeng, the reason the Great Wall has achieved such results is also due to changes in the sales structure. The Great Wall has more than half of the market share in pickup trucks and hardcore off-road tracks, which directly forms the Great Wall's moat.

In particular, the hardcore off-road track represented by tank brands, the Great Wall already has a market share of more than 60%. Products range from tanks of 300, 400, 500, and 700, with prices rising all the way up, from 0.2 million-0.7 million yuan; in terms of power, the Great Wall provides gasoline, diesel, HEV, and Hi4-T power systems, so that on the hardcore off-road racetrack, consumers have enough choices in tank brands.

Furthermore, the tank also became a higher-priced model in the Great Wall product series. As of this year, the monthly sales volume of a tank brand has exceeded 0.02 million units, which has become a key factor in Great Wall's profit growth.

This impressive report card has brought the Great Wall to the limelight recently, and has also given the industry a new evaluation of the Great Wall's failure to participate in the price war — the Great Wall does not fight a bloodbath price war, which now also seems like a wise choice.

Price wars continue in the industry, and bicycle sales prices and bicycle profits of various companies continue to decline. According to Li Ruifeng, it is important to pursue quantity and scale efficiency, but it is necessary to find balance. If in order to pursue scale effects, bike prices drop over and over again and continue to lose money, it is to drink alcohol to quench your thirst.

The Great Wall is another example. According to financial reports, Great Wall's average bicycle revenue was 0.1648 million yuan, an increase of 0.0299 million yuan over the previous year, for 4 consecutive years; the net profit of bicycles was 0.0128 million yuan, an increase of 0.0101 million yuan over the previous year.

According to Li Ruifeng, the increase in the average price of bicycles itself is a very difficult thing. After all, in an environment where consumption is being downgraded, it can be seen that the average bicycle price of many car companies is falling. The increase of 5,000 yuan is a very difficult thing. The Great Wall has also increased by 0.03 million yuan, which is even more rare.

Over the past period, a number of Great Wall executives, including founder Wei Jianjun, publicly stated that Great Wall Motor did not lose money to make money. In the midst of an earlier fierce battle, the Great Wall lost 0.02 million yuan because Euler's Black Cat and White Cat had to lose 0.02 million yuan, and this model sold about 0.02 million units a month.

On the other hand, Great Wall's profits can rise rapidly, also because Great Wall has achieved good results in overseas markets. As we all know, overseas markets have always been “fat meat” for Chinese car companies. Even with tariffs, profits are much higher than those in the domestic market.

In the first half of the year, Great Wall Motor's overseas sales volume was 0.1998 million vehicles, up 62.09% year on year, accounting for 36% of total sales; while overseas market revenue was 36.76 billion yuan, up 77.87% year on year, accounting for 40% of total revenue. As can be seen, the price of bicycles sold in overseas markets is higher than the price of bicycles in the domestic market.

At every auto show or new product launch, Great Wall also invites overseas dealers, KOCs, etc. from thousands of miles away. It's enough to see that the overseas market is also an important part of Great Wall's pursuit of quality market share, and it continues to gain strength.

Facing the intelligence of the second half of electric vehicles, Li Ruifeng stressed that next, the Great Wall will create the “Great Smart Wall” label.

This is also the focus of the Great Wall Group's recent efforts. At the Weipai Blue Mountain press conference in August, Wei Jianjun, who had not appeared at his car product launch in six years, took the stage to stand as an intelligent platform for the Great Wall, and even unceremoniously claimed, “Currently, the Great Wall is number one in terms of intelligence.” Earlier, Wei Jianjun started live streaming to test his own features, and achieved zero takeover several times.

On September 2, Wei Jianjun also announced on Weibo that Great Wall CTO Wang Yuanli will officially retire honorably on September 30. Wu Huixiao, the current vice president of Great Wall Intelligence, will succeed Wang Yuanli. From this personnel appointment, it is also possible to see how much the Great Wall attaches importance to intelligence.

Admittedly, the automobile industry is changing, but in Li Ruifeng's view, too many comparisons and too far-reaching predictions are meaningless. In the midst of big waves, every car company must maintain its own pace.

At the Chengdu Auto Show, Li Ruifeng had in-depth exchanges with Wall Street News and other media on topics such as Great Wall Motor Group's development, intelligence, and overseas strategy.

The following is a transcript of the conversation (edited):

Q: Great Wall's financial report for the first half of the year was very good, with profits of more than 7 billion yuan. Many other manufacturers lost money in the first half of this year. Why was the Great Wall unaffected by the price war? Where is the moat of the Great Wall?

Li Ruifeng: As you can see from the composition of Great Wall's financial reports, one is a tank brand, and our unique pickup truck category advantage. Our market share is close to 50%, so these two are moats for our brand and profit.

As long as the market is fully competitive, you can't have exclusive access to this field; this is normal. Why do we have an advantage over a longer period of time in this process. The first is that we have a category advantage. In terms of the product development cycle, there is a certain cycle of entry into this field.

Another thing is that I just mentioned the pickup truck field. Even if others enter, it will be difficult to shake our position, including tank brands. These two brands are more than just the size of sales. Core technology, user circles, market holdings, globalization, and networks spread all over the country. These moats will not be shaken simply because others enter. We have built a strong mindset in these categories because we are No. 1.

Furthermore, after 2006, after the 10% subsidy policy for new energy sources was gradually withdrawn or abolished, if the oil and electricity related policies were equal. So do so-called full-power, gasoline cars, diesel cars, and HEVs still have certain opportunities? In this process, we will also have the cost advantage brought by the engine transmission because we have the advantage of vertical integration.

New energy is more than just three electricity. Some say smart driving isn't just what you need, but future products must have it. In terms of intelligence, we have full-stack self-development capabilities, the cost is better, and we can achieve all standards for each brand. Another example is the hybrid architecture we just mentioned, the Hi4 technical architecture, and 14 million customers, which are all very important moats for us.

Q: I know that the tank brand's sales volume has exceeded 0.5 million units. What do you think of the tank brand's good results?

Li Ruifeng: Actually, I don't think the tank brand can be viewed in isolation from the tank brand. This is actually the overall strategic and quality success of Great Wall Motor in focusing on the SUV field.

The Tank 300 we unveiled at the Chengdu Auto Show in November 2020 sparked a boom in hardcore SUVs and formed the “tank phenomenon.” This is actually the result of Great Wall's long-term focus on SUV technology, building up a user base, and technical reserves. Coupled with the market's recognition of SUVs, it is the success of the tank brand.

The launch of the Tank 300 satisfies consumers' demand for high cost performance, comfort, and intelligence, especially those who want to be able to travel freely under complicated road conditions and even go on international adventures. Precisely because of this success, we decided to separate the tank brand and become an independent brand focusing on hardcore SUVs.

When it comes to the success of the Tank 300, we don't think it's just an accident; rather, we have a clear plan on how to gain a good market share in the hardcore SUV field. As can be seen, every year we launch new models, from the tank 300 to the tank 500, to the 3.0T model, and later the 400, 500, and 700 tanks. The price ranges from 0.2 million yuan to 0.5 million yuan, and even the limited edition 0.7 million yuan model.

We provide gasoline, diesel, HEV, and Hi4-T power systems, and have achieved full coverage of power matching and price ranges.

After four years of development, under our all-scenario, full-power, and full-price range layout, the tank brand reached a market share of 0.5 million vehicles in a short period of time.

Of course, this 0.5 million vehicle is not limited to the domestic market, but also includes our achievements in overseas markets. Because we were positioned in the global market right from the start. In the Australian and Middle Eastern markets, our Tank 500 is already on the market. As a result, this 0.5 million vehicle market share is the result of global sales.

Q: In the automobile market, we still need to pursue a scale effect. After a scale effect is formed, gross profit can be raised. If the Great Wall chooses to continue to segment the market, is the market segment also facing a slowdown in its growth. If the Great Wall does not pursue volume as much, how can we achieve the logic of scale effect?

Li Ruifeng: The general feeling is that it's just like the numerator denominator. When your costs are fixed, then what is the denominator? The denominator is probably the sales volume. When you sell for 1 million, sell for 2 million, and sell for 3 million, then isn't this cost well distributed? Isn't the entire industrial chain connected? This is true from the concept of a math problem.

However, in terms of consumer goods as a whole, this is not true, that is, any item, as long as you maintain your basic quality bottom line, whether it's the three major pieces, or batteries, if you want to say it's brand value, if I want to bring a better experience to consumers.

As long as it is below the cost of raw materials or below the sales margin, it is impossible for this car to be profitable. Talk to the supplier about cost reduction. Tell me how much you can cut when you reach sales scale. The cost of raw materials can be reduced to 5 cents. When he can give you 2 cents or 3 cents, do you still dare to use it? If you want to reduce it in layers, it will inevitably break away from that bottom line in the entire industrial chain, and many things will lose their bottom line and quality.

Many brands have sales volume, which is lower than the cost of raw materials. They may have other demands, either for listing or for local governments, because if there is a factory there, it needs to be sold to a certain scale to create jobs.

I think it's probably just a drink to quench my thirst. This industry, the capital market is now very calm; the listing may break down. How long can this superior thing last? To what extent can blood be transfused continuously? When everything recedes, when it depends on an enterprise's independent operation and accounting, how should he operate? It also sells a lot of money. How long does it take for you to raise the price of a bike, and then turn a loss into a profit?

Q: I also saw some foreign faces at the booth today, so I would like to ask if these are Great Wall dealers overseas? Or overseas media invited by the Great Wall? Also, let's take a look at the current overseas sales situation of the five major Great Wall brands. Which brands or products are more popular with users in overseas markets.

Li Ruifeng: First of all, I am trying our best to expand overseas over the past few years. From the Beijing Auto Show, including the Chengdu Auto Show, these are all our overseas partner dealers, some overseas local media, some local KOC, and some loyal customers.

We have a tank brand and Great Wall artillery production base in Yongchuan. This time they participated in our Chengdu Auto Show, the other was to experience at our production base, see our intelligent production line, and then experience the good experience of our tank 300 and Great Wall artillery.

For overseas markets, because the scope is relatively wide, including Eurasia, the Middle East, and North Africa. It also includes Brazil, Mexico, Australia, Thailand, Malaysia, and the European Union.

The regions are different, and the focus is different, such as the Middle East and North Africa, which is probably more suitable for the Great Wall pickup series, as well as the Haval and Tank series. As far as the ASEAN market is concerned, in Thailand, we use the pure electric model Good Cat and Haval PHEV as the main participants in this market. The Eurasian market covers a wide range of regions, and all five major brands have layouts.

Q: At the Beijing Auto Show, the five Great Wall brands first appeared on one booth at the same time, then Great Wall proposed the “One Great Wall” marketing concept, and then implemented the “One Great Wall” marketing concept. Previously, we mentioned that the Great Wall might give it a label, such as an SUV, which is a very clear label, so now the Great Wall has five major brands, and it has returned to “One Great Wall”. What do you think of the Great Wall label in the future?

Li Ruifeng: We play chess at home and abroad, so what stands out is “One Great Wall.” The symbol of “One Great Wall” is the “Great Smart Wall”, and Great Wall Motors must be intelligent. Today's new Blue Mountain has a first-class smart cockpit, as well as our intelligent driving and no-image NOA, including our Hi4 technology system. After the successful operation of Blue Mountain, we will gradually become popular in our tank brands, and even our intelligence will be extended to the Haval brand in some way.

Also, there is the “Great Off-Road Wall”. Off-road is the gene of our Great Wall. Pickups are also off-road. Wei brand SUVs also have certain four-wheel drive performance, not to mention tank brands, and so is Haval.

Then there is the “Great Wall of the World,” which means that any of our products is based on global R&D and layout, verification and adaptation, so this is a prominent feature of the Great Wall.

Q: Does Great Wall closely manage overseas dealers now?

Li Ruifeng: First, there are overseas distributors. Overseas, we used to be several horizontal and vertical. Most of us operate in the form of subsidiaries. For example, in Eurasia, we have independent subsidiaries, our complete team, and locally recruited executive teams, which form the overall operation of the Eurasian market. We are the same in ASEAN, including the European Union, and even Brazil, South America, and Australia.

Q: Now I think the biggest change in the Great Wall is that it has become very active in external communication, including the chairman's live broadcast or the executive opening a microblog. Compared to before, I can have fun and do new communication for these new media. Has there been an internal evaluation of the promotion of sales volume and market promotion?

Li Ruifeng: For us, we must cater to and apply this new gameplay. In the age of traffic, the aroma of wine is still afraid of deep alleys, so even the best products need to be supported by traffic. In this process, the first one is that our chairman can take the lead in experiencing and enjoying some of the rules of the Internet. This will naturally bring in huge traffic and bring dividends to the Great Wall brand and products.

Furthermore, after the leader experienced the Internet, his driving force, his role as a benchmark, and we were also very moved. We caught up, not simply by accommodating. Just as a marketing node, this is your responsibility; this is something you should do. Now we feel that the output content is more dimensional and more colorful, which is one of our achievements.

Q: The Great Wall Smart Choice is now officially in operation. What is the operating status of this model? What are its future plans, and what are its concerns? Is the short-term sales volume or something else? In addition to tanks and Wei Pai, will other brands enter the market in the future? Have you encountered any resistance in implementing the dual-channel model? How to balance the relationship between direct stores and dealers?

Li Ruifeng: First, we have a distribution+direct sales model. Direct management's position is to lead Wei and Tank to improve the brand. Based on the regional center distribution model, many dealers and Great Wall have been partners for 20 years, growing as the Great Wall grew.

One problem is that when the brand is upgraded, it is difficult for us to reach the corresponding audience, and we have no BBA experience. To put it bluntly, it's just such a heavy responsibility, such a big investment, who will do it? I think we should do it, and that's why we introduced the direct management model. Like Taikoo Li, we are not afraid of costs, build flagship stores, recruit personnel, do training, systematize all content, set benchmarks, and replicate and empower dealers. Dealers, on the other hand, are responsible for sales volume and are practitioners and maintainers of brand maintenance at the regional level. At present, we have completed the layout of outlets in the main markets of Tier 1 and 2. There are probably more than 150 direct-run stores.

Q: You just shared the financial highlights of the Great Wall, so what else do we need to improve? Another question concerns the industry. Recently, there may be some big predictions in stages. For example, after another 10 years, there will only be a few car companies left in the industry. Please share this as well. How many do you think there will be left in the future? What type of car is it probably?

Li Ruifeng: On the financial side, our revenue for the first half of the year exceeded 91.429 billion yuan, net profit to mother exceeded 7.079 billion yuan, net profit after deducting non-mother net profit of 5.651 billion yuan, and the average bicycle revenue was 0.1648 million yuan, an increase of nearly 0.03 million yuan over the previous year.

Currently, pre-sale of the second-generation Haval H9 has started. We are launching the gasoline version for the first time, and there will be other power versions in the future. A fuel version including the Raptor will also be available. With the gradual improvement of the layout of the three categories of urban SUVs, light off-road SUVs, and hardcore SUVs. I believe that from September to December, Haval will see an increase in sales volume, and profits in the second half of the year will also be better than in the first half.

As for how many brands are left, I think we still need to be good ourselves. Running at your own pace is the most important thing.

Q: Facing a competitive environment, I would like to hear your understanding of how Great Wall Motor can consolidate overseas markets in terms of its global layout and strategy.

Li Ruifeng: Regarding globalization, every OEM is making efforts, and we are the same. We have achieved some results so far. Overseas sales of 0.1998 million vehicles were completed in the first half of the year.

We have been doing overseas markets very early, almost 26 years. In 1998, it was the number one pickup truck export. Currently, our overseas network layout is very complete, and there are many dealers who are interested in joining. Eurasia, the Middle East, North Africa, South America, Mexico, ASEAN, the European Union, Brazil, and Australia are all major markets. We have factories in ASEAN, Brazil, and Europe and Asia, and Mexico is also planning. Localized production and vertical integration can help us to further cultivate the market.

We not only use sales volume as our sole standard; we must not only do localized production, subsidiary operation, and brand building, but also accumulate long-term reputation for supporting equipment, accessories, and services. We cannot allow the phenomenon of high sales and poor reputation. This will affect the reputation of Chinese brands. Therefore, our overseas business will definitely be based on long-term planning and adhere to the long-term principle.

In addition to category advantages, another major advantage of Great Wall overseas is full power, from gasoline and diesel to BEV, HEV, and PHEV, which we can provide as long as there is demand in the local market. Furthermore, because domestic competition is fierce, the iteration speed is relatively fast. But there are models, such as the Haval H6. In some regions, our first and second generation products are still selling very well and are very competitive. This aspect will bring better sales performance, and at the same time, when demand in the local market increases, we can also quickly upgrade new products.