FAW: Group sales of 4 million vehicles in 2020 with 2 million from own brands

Own brands undergoing urgent rebuilding, joint venture brands aiming to enhance production systems

2016/12/16

Overview
FAW Group overview
Mid-term plan: Aiming to exceed 4 million vehicles as a group by 2020
FAW Group's policy: release of fifty models group-wide, including eighteen models from own brands, and nineteen new energy vehicles
Plan by OEM: Rebuilding own brands, enhancing production system of foreign brands
Own brands: Hongqi, Besturn, Junpai, Xenia product lineup expansion imperative
Foreign Brands: Enhancing production capacity in preparation for 2020, releasing China-exclusive brands and models
Production capacity at major FAW Group plants
FAW Group sales numbers in China (factory shipments)
Sales forecast by LMC Automotive:FAW Group is will change to rise in 2017, but difficult to secure a strong position

Overview

China FAW Group Corporation (hereafter referred to as the FAW Group) is the oldest state-owned group company that focuses on automobile manufacturing. Its headquarters is located in the northeastern part of China in Changchun, Jilin province. FAW Group was previously First Automobile Works, which was established in 1953, four years after the founding of the People's Republic of China. In 1956, the company began production of the Jiefang truck, and later the Hongqi, the official vehicle of the Chinese government.

In 1991, the group signed a joint venture agreement with VW, and in the early 2000s, with Toyota, to grow along with the developing Chinese automotive industry. However, in recent years the automaker has been facing competition from private companies, as well as regional government-funded OEMs.

While many Chinese automotive groups are now becoming listed, and some subsidiaries within the FAW Group are as well, the main company itself remains unlisted. In March 2015, Xu Jianyi, the chairman of the FAW Group, was charged with serious discipline violations and misconduct, and was questioned by the Central Commission for Discipline Inspection, after which he later resigned. This event sent shockwaves throughout the Chinese automotive industry.

In 2013, FAW Group had vehicle sales (vehicle shipments from its plants) totaling 2.91 million vehicles. Although the group exceeded 3 million vehicles in 2014, the company sold 2.84 million vehicles in 2015 for a year-over-year (y/y) decrease of 7.9%. Own brand vehicles also decreased y/y by 18.8% to 500,000 vehicles, and foreign brands likewise fell y/y 5.1% to 2.34 million vehicles. Among its foreign brands, FAW Toyota was the only one to see a y/y increase. In 2010, the FAW Group held a 14.2% market share in China, but this has continued to shrink since that time, dropping to 11.6% in 2015. Vehicle sales in the period January to October 2015 increased y/y by 12.2% to 2.55 million vehicles, but the Group's market share has remained unchanged from the full year 2015.

The FAW Group will strive to become a high quality, highly profitable company, and has set a goal of selling 4 million vehicles or more by 2020 as a group, including 2 million vehicles from its own brands, and to have a market share of 15% or more. In order to achieve its goal, FAW Group needs to consolidate some of its own brands to increase efficiency and thereby strengthen them.

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