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For recent 20 years, China bus industry grows to be a major force of China automobile industry out of an inconspicuous industry. After covering domestic markets, China bus industry started its powerful development in overseas market gaining lots of good orders and news. However, global financial crisis which broke out in 2008 was a lesson for complacent China bus industry to learn how to develop in a more stable way in overseas.
Since 2010, China bus industry continued its overseas development after what it had been through, discovering the icebreaking key to current overseas dilemma with more mature strategy and unveiling new chapter of bus export. As the domestic earliest exporting bus manufacturer, Golden Dragon increased its revenue and overseas market performance in 2011 after slow down. In addition, Golden Dragon established the first China bus manufacturer’s subsidiary in Russia, establishing a new mode of China bus in overseas market. Recently, Bao Hongquan and Ju Jiang, GM and deputy GM of Golden Dragon Overseas Sales Company, were both interviewed by our reporters sharing icebreaking process of Golden Dragon in overseas market.
1,200 Golden Dragon Light Buses To Be Delivered to Egypt in Xiamen Modern Wharf
Recovering Increase of Export Giant—Golden Dragon
Export business of Golden Dragon started in 2003 and climbed to its summit in 2007, which was ranked the first with its total export bus sales revenue of 143 million USD in China. Nevertheless, due to financial crisis and other relative reasons in 2008, export sales revenue of Golden Dragon began to decrease greatly to less than 15 million USD in 2009.
Through ups and downs, Golden Dragon started to rearrange its overseas market plan and adjusted layout and structure of overseas markets. Since then, Golden Dragon achieved its second increasing overseas sales revenue by 67 million USD in 2011 and 98 million USD in 2012. This sales revenue of overseas business of Golden Dragon would exceed 100 million USD in 2013. Bao Hongquan said, “By now, sales increase in overseas market is recovering increase of Golden Dragon. But overseas sales right now are greatly different in regions and product from what it was in the past.”
In the past years, Golden Dragon overseas markets were mainly Middle East, Russia and South Africa. For now, Africa is the first large market for Golden Dragon and Central and South America is gradually on the way to start. As for vehicle mode, Hiace Light Bus was the major one for Golden Dragon. At present, large bus is the representative of Golden Dragon and there is also large-middle bus developed for regional markets.
“Competition of light bus at home and abroad is very fierce. In overseas market, you have to face competitions of new vehicle and second-handed automobile from Japan and other countries gaining small profits. Faced with this situation, we took variation strategy which was to export products with higher configuration to overseas market as possible as we can. This move matched our brand image and was helpful for us to develop in the long run. At present, lots of overseas customers became aware of China bus brands. Especially after financial crisis, they became more prudent about choosing vehicles due to operational pressure. In prior to real purchasing, they would study and make a real research about different brands.”
Led by Focus of Quality, After-sales Service and Brand, Golden Dragon developed its overseas market process at a stable speed improving market shares in regional markets. In Egypt, dealer of Golden Dragon was once dealer of Japan Toyota which just tried to cooperate with Golden Dragon due to Japanese Yen appreciation and subsequent increased cost. However, good performance of Golden Dragon bus and sincere collaboration with Golden Dragon widened cooperation degree. For now, annual sales of 4,000—5,000 units made this dealer the first one in Egypt. Bao Hongquan added, “If political situation of Egypt is stable, we would achieve better sales there.”
Golden Dragon XML6155 Bus Running on Route 28 in Finland
Subsidiary Mode in Russia
Russia market is another representative market of Golden Dragon in overseas markets.
Golden Dragon once achieved something in Russia. Sales of XML6117 had already reached to 800 units in 2007, which was only two years later from 2005. At that time, renewal buses of The Third Bus Company in St. Petersburg of Russia were almost Golden Dragon buses. However, Golden Dragon came across sudden failure in Russia which was a result of its aggressive development.
Ju Jiang, deputy GM of Golden Dragon Overseas Sales Company continued to introduce, “According to regulations in Russia, all imported vehicles must pass Russian authentication for being sold. Authentication based on regulations of Russia needs local company to apply and hold. Different from other European countries, vehicle authentication can belong to automobile manufacturers. Thus, this authentication process was taken by cooperation with dealer.”
In the beginning, cooperation between Golden Dragon and dealer went quite well by which market was developed rapidly by pouring buses to Russia. Whereas, due to aggressive sales policy of dealer and capital chain rupture by unsuccessful investment to other industries, this dealer went broke in 2008. Both a large amount of unpaid payment of goods and after-sales service of Golden Dragon became two major problems. Customers could not find original dealer when they needed maintenance. As a result, they felt quite disappointed about Golden Dragon Bus and market share of Golden Dragon contracted a lot.
“In 2009, we picked up our business in Russia at a negative basis. Despite lots of customers, almost all of them were impressed with bad after-sales service of Golden Dragon. What’s worse, former authentication became invalid with bankrupt of original dealer. Investment in former authentication was also wasted to some degree.” With former lesson in Russia, Golden Dragon was very cautious about choosing dealer and decided to take all cost of new authentication and the whole certification right. But, risk of such cooperation still remained for Golden Dragon which would like to further Russian market. When dealer achieved expanding its scale, they began to hold different ideas from manufacturers due to benefit. With authentication held in their hands, cooperation could not help but grow some cracks.
Under such situation, Golden Dragon established its overseas subsidiary innovatively in 2013, which was the first company to do so in China bus industry. Bao Hongquan stated, “Subsidiary is different from branch office and agency, which is a local independent legal company registered in Russia. Golden Dragon holds 100% controlling stake and could proceed with bus selling and authentication like former dealer. It is independent legal entity which could control risks. Authentication of all vehicles could belong to this subsidiary, which is a good basis for us to develop in Russia market in the long run. Establishing a subsidiary allows us to sell buses in Russia on behalf of Golden Dragon which could be taken as the general distributor. Hence, we could develop dealers based on research. Single dealer could not operate well in such a boundless Russia. In addition, we could fix influenced reputation caused by bankrupt of former dealer and improve image of Golden Dragon. Furthermore, we could develop better after-sales service providing improvements of bus for customers timely. And we could also really understand local culture and market and get close to customers.”
Icebreaking Key
Establishing a subsidiary has effect very soon.
In 2013, Russia released non-tariff barrier, charging processing compensation of imported bus manufactured by countries except Russia, Belarus and Kazakh. This policy increased about 10% of imported automobile price. And bus manufacturers in Russia developed rapidly and improved a lot. Hence, China buses almost lost competitiveness and advantages in Russian market, by which export of China bus to Russia almost came to an end.
“Due to this policy, other enterprises of China almost stop their export. But, authentication of many other Golden Dragon vehicles prevented this shock from Golden Dragon. Based on current situation, companies without subsidiaries in Russia would lose their Russian market. As a matter of fact, sales revenues of Russian market would double this year.”
Subsidiary mode actually is the way when Golden Dragon saw lots of disadvantages of other mode. According to Russian regulation, vehicle authentication could only be possessed by one company which is a form of general distributor. Owing to benefit distribution, manufacturers would easily be controlled by dealer. This bad cooperative basis would bring bad result to eventual cooperation. However, establishing subsidiaries is only a small part of Golden Dragon’s plan. “Subsidiary is a basis for Golden Dragon to proceed its international development in the future. If we decide to enter this market completely and invest our product, capital, technology and brand, present subsidiary would be a good transition. Those staff we trained well with a good and precise understanding of local market would help.”
Bao Hongquan stated his opinion about future overseas strategy of Golden Dragon, “International development in the future is not just limited to product. Technology, capital and brand must all enter international market. Thus, we need and must develop at a stable state in overseas market and choose good products to cover one market at a time instead of covering all market in a hurry. Choice and judge of overseas market must be clear and product plan has to be suitable for local market. Building our own overseas talent team and controlling risks are what we have to do for the good goal in the long run.”
Overseas market is definitely the path which is necessary for China bus industry in the future. On this path, Golden Dragon has already gone ahead with more icebreaking keys held.