FAW Has Met Its Waterloo during China’s Twelfth Five-Year Plan

From 2011 to 2015, this five years fell under China’s Twelfth Five-Year Plan weren’t exactly the best years for the ill-fated First Automobile Workshop (FAW). Back in 2010, FAW’ s sales rose to the 3th place among all other Chinese domestic carmakers, after SAIC Motor and DongFeng Motor. Encouraged by its 1 million sales, FAW has set 2 ambitious goals in 2010: by the year of 2015, to expand its annual capacity to 5 million units and raise its market share to 20%; to boost the annual sales of its domestic brands to 2 million units and invest 150 billion rmb in the research and production.

But FAW, the very first People’s Republic of China-born carmaker, was not even close to its original goals in the year of 2015. Statistics shows, this group only sold 2,562,500 units by last November, including 447,800 domestic models.

The dilemma to develop domestic brands

In accordance with China’s Twelfth Five-Year Plan, FAW chose to put priority on the development of domestic brands, but only to meet its waterloo due to immature and inconsistentbrand building and planning. FAW’s domestic brands, namely OuLang, HongQi and Besturn, all failed its expectation, influenced by various reasons respectively, including overpriced products, ill promotion and low capacity.

The setback of corruption within the group

FAW has caused all kinds of suspicions for huge spending inthe research and development during theTwelfth Five-Year Plan. Take HongQi for example, the research fund of this well-known domestic brand has totaled 16 billion rmb from 2011 to 2015. To be noted, the research money spent on Boeing 777 passenger plane was only 3 billion dollars and Tesla Motors, the hottest automobile brand in the world, only spent 3 billion dollars in research and development in 2014. This usually huge spending has finally uncovered the corruption within FAW.

By last March, plenty of senior officers in the group have been suspended, transferred or even investigated for the allegation of corruption. Influenced by unfavorable news, FAW failed to go public and has no choice but to spend another 2.8 billion rmb to bail out Xiali, one of FAW’s 2 enlisted entities, from delisting.

The draw of revolution

Last October, Besturn B30 has officially rolled off manufacturing line at Changchun FAW’s second plant. Before that, FAW has undergone great changes focusing on domestic brands with the establishment of 3 divisions of passenger vehicles, commercial vehicles and HongQi brand respectively. According to FAW’s plan for the Thirteenth Five-Year Plan, this group will stick to an overall strategy covering all divisions, in a bid to boost its sales to 4 million units and introduce 18 new domestic models; to lead the market of alternative energy vehicles by raising its market share to 15% in respective segmentby the year of 2020.

In the future, FAW must act more prudently and, hopeful, will be back on the right track.