China On A Deadly Brand Binge

If your dearest wish is that the Chinese car industry will implode, then you should pray that the Chinese remain on strategy. For whatever inconceivable reason, the Chinese car industry has embarked on a plan, which – if properly executed – will mean its assured destruction.

Government planners tell Chinese car manufacturers: “Create successful brands.” Manufacturers reply as a chorus: “Yes, we will create as many brands as possible.” Every second word at the Chengdu conference appeared to be “brand.” If Chinese carmakers will do what they say – and they appear to be utterly committed – then China will soon wallow in a sea of car brands nobody has ever heard of, and nobody will ever be able to remember. Sometimes, it feels as if it is the long-term goal to give each and every of the 1.3 billion Chinese his or her individual car brand.

It’s not that there is a shortage of brands already. Nobody has an exact number, but the guesses are over 100. Soon, that number could easily double. BAIC alone announced today that it will add 9 new brands on short notice. Others have similar plans.

At the same time, speakers at the conference named many reasons why it is less than prudent to create many brands.

• “Our brands have low name recognition.” But nobody warns that it costs untold sums of advertising money to create this recognition.
• “We compete against brands that sometimes are over 100 years old.” But nobody warns that a new brand can take decades to be successful – if it doesn’t succumb to crib death.
• “The multinationals invest a lot of money into advertising.” But nobody warns that already small budgets will get increasingly smaller when spread over many brands.
• “Customers expect to pay 20 percent less for homegrown brands.” But nobody says that it is more lucrative to stay with the brands we know.
• “Consolidation is a given.” But nobody says that the easiest way to consolidate is to trim down brands.

While large car companies the world over prune their brand portfolios, Chinese carmakers are turning from car factories into brand factories. Joint ventures that have successful and well-known brands are urged to create new unknown brands. The knowledge and grasp of branding appears to be rudimentary. Colleagues in the business say that often, “branding” in China begins and ends with developing a logo.

Developing a new cars brand is risky, costs untold amounts of time and money. China appears to be dead-set to embark on this treacherous, costly and long journey with a highly doubtful return. In the bad old days, GM tried to leverage the equity remaining in existing brands by sticking their badges on the same body. Even the smallest carmaker in China appears to be bent on being a miniature GM. Except that now unknown badges are stuck on the same body.