Hongqi aims at high-end market

FAW Group Corp, one of China's leading automakers, plans to launch its new generation of Hongqi vehicles in the end of May to attempt to break into a domestic high-end passenger car market that is currently monopolized by foreign brands, Xinhua News Agency reported Sunday.

The Hongqi H7, a high-end passenger car that took the company four years to develop, is expected to make a grand entrance into the consumer realm on May 30, said the report. The company could not be reached by press time.

Hongqi, which means "red flag," is China's oldest and most famous homegrown auto brand. It is likely to gain a bigger share of the high-end domestic market this year, as sales of the H7 will be boosted by increased government orders, said Cui Dongshu, deputy secretary-general of the China Passenger Car Association.

President Xi Jinping noted at a plenary meeting of the CPC's Central Commission for Discipline Inspection in January that all Party organs and members should be frugal, which was generally considered a sign that the government would buy cheaper domestic cars.

Some of the country's top leaders have already begun to use domestic car brands. On March 7, Minister of Science and Technology Wan Gang drove a BYD E6 electric car to attend the two sessions.

An official surnamed Fan at Jilin-based FAW Group said on March 20 that FAW is now in talks with more than 10 provincial governments over possible procurement orders. FAW has already sold 500 Hongqi H7 cars to the government, media said in March.

Hongqi has also recently been used by the central government to receive State guests. In April, French President Francois Hollande used a Hongqi car as his vehicle during his state visit to China. And in May, China used a Hongqi vehicle to receive Palestinian President Mahmoud Abbas.

This will largely enhance the brand's value and is likely to stimulate sales, said Fu Zhiyong, managing director at Beijing-based consultancy ACME Management Consulting.

Inspired by the government's frugal style, domestic businesspeople and associations, another source of huge demand for high-end cars, are also likely to choose home-grown auto brands, remarked Cui, predicting that homegrown brands will be the mainstream in the sector within five years, even though their current market share is minimal.

However, Fu spoke of his concern that the prospect for homegrown auto brands is still unclear, since they lag far behind foreign and joint-venture auto rivals in terms of design and technology.

Quality is the key to success and domestic automakers should not rely too much on government policies or purchases, he noted.

Some analysts have said that the selling price of the Hongqi H7 series should range from 279,800 yuan ($45,635) to 449,800 yuan. Fu said it's hard to speculate, but that the selling price will be lower than that of foreign rivals.