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Taikoo returns to mainland as imported-car distributor
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Daring and fond of adventure, Huang Chili, the head of Swire Motors China under the Taikoo Motors Group, loves mountaineering, deep-sea diving, car racing, and even once ran a marathon in the Sahara Desert.
His experience of endurance and adaptation in all environments may serve him well as he seeks to conquer the mainland car market for Taiwan-based Taikoo Motors, the car-trading subsidy of Hong Kong-listed Swire Pacific.
After a brief presence on the mainland more than a decade ago, Taikoo staged a comeback last month with the opening of a 4S showroom in Shanghai for Volkswagen imports. In China, authorized dealerships are called 4S car shops — referring to sales, service, spare parts and surveys, or customer feedback.
The auto distribution market in China, which is now more open to offshore investors, is a highly competitive one as car sales growth slows. Inventories, especially those of imported car dealers, have been hovering around the “alert” level for months, with sales target pressures mounting as carmakers push dealers to take more stock.
As the exclusive distributor for many brands in Taiwan and with more than 40 years of industry experience, Taikoo Motors is no stranger to the task at hand, Huang said.
“Car dealers are forced to increase their stockpiles more or less in every market,” he said. “It would be great if carmakers could foresee precise demand each year.”
The trick is in managing the risks so that inventory backlogs are kept to a minimum and don’t harm the bottom line too much.
“Despite all the pressure from the supply side, cars need to be sold at the right price,” Huang added.
Declining prices
The prices of imported cars on the Chinese mainland have been dropping this year amid what is being tactfully called a “market adjustment” and amid recent public outrage over alleged exorbitant profits in the industry. Undaunted, Huang said this is just a transitional period.
Mainland consumers, just like buyers once were in Taiwan, often want a certain car so badly that price doesn’t matter so much, he explained. When a car model has more buyers lined up than it can handle, dealers naturally start to kick up the prices.
“But is this the car for you, without any alternatives?” he said, playing devil’s advocate. “In an information age, one can easily compare prices and evaluate choices. Mainland consumers are just not quite experienced enough … but I believe that situation won’t last more than two or three years.”
In a mature car market like Taiwan, which doesn’t have much room for price wars to boost sales, car dealerships have to stand out on their services.
That’s the emphasis Taikoo Motors will bring to the mainland, where it aims to become the No.1 car dealer in the eastern part of the country in five years — in prestige if not in sales.
“The numbers, most of time, are just a game,” said Huang. “The most important thing for us at this stage here is to earn recognition for our services and brand.”
The company may open up to 50 locations on the mainland in five years, he added. Its next outlet has been set up in Fuzhou, the capital of Fujian Province.
The timing for Taikoo Motor’s entrance couldn’t be trickier. This month has seen the implementation of China’s first car-warranty regulations, which may further complicate the relationship of car dealers with carmakers and consumers.
Under the new rules, car dealers will be responsible for providing consumers with free repairs, replacement and returns, and will be entitled to seek reimbursement from manufacturers afterward. In reality, they could find themselves squeezed in the middle.
Huang dismisses concern about the new rules. Although Taiwan doesn’t have similar regulations, car dealers there follow a set of strict, unwritten industry guidelines. Taikoo Motors finds the guidelines have had limited impact on operational costs because today’s vehicles have such a stable level of quality.
For Huang, consumer advocacy campaigns for the rights of car buyers aren’t a threat.
“We should see these things coming and set aside money — goodwill payments, for contingencies,” said Huang. “A 1-2 percent chance of that happening is still acceptable.”
However, no market can afford to let half of its car buyers adopt extreme approaches to defending their interests, he added.
Holding strong belief in the fairness of the car-warranty regulations, Huang said he has strengthened his company’s commitment to protecting consumers, but not to the extent of “making them feel like arbitrary emperors.”
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