Geely had a lot going for it when it first arrived in South Africa in 2007. The CK sedan was one of the better Chinese products we had sampled (CAR, August 2007), which may not be saying much, but a trip to China in 2008 confirmed that a spate of new and promising products were looming for local introduction.
Like most Chinese entrants, the economic slump had a large impact on sales, especially for new and untested brands, which meant the importers of Geely had to close shop. Two years later, with lessons learned and a few second-generation vehicles on offer, Geely has returned to South Africa.
At the helm is John Jessup, a highly experienced motor man who served on the boards of both BMW and Nissan, along with established investors in the form of the Hallmark Group (also the importers of GWM, the most successful passenger Chinese brand in South Africa) and the Magic Group, both large-scale owners of multi-franchise dealerships.
We recently returned from the local launch of the LC hatchback, a car which we saw in concept form in China in 2008, and came away impressed by its levels of refinement, ride quality and specification. As before, Geely clearly has a lot going for it. But, challenges remain. We chatted with Jessup regarding the future of Geely in South Africa.
Q: What makes Geely in South Africa different from the previous importer? People will surely be apprehensive about the brand, considering what has happened over the past two years.
A: The company is funded by strong shareholders with many years of motor experience and investments.
Q: What damage has been done to Geely’s reputation because of this?
A: Fortunately, not too much. There were 12 dealers who “held the fort” and never stopped believing in the potential of the brand.
Q: Do you foresee this historical baggage to be a problem for you going forward?
A: Yes, of course. We cannot pretend that it didn’t happen.
Q: Do you have any specific strategies in place to counter the effect?
A: The key countermeasures, besides proper funding, relates to after-sales support. We have an excellent parts structure carrying parts to the value of R10 million in our Midrand warehouse and we have undertaken to airfreight, at our own cost, any part that is needed to keep our cars on the road. Naturally, parts prices are also critical and a recent Kinsey report found our parts prices to be between 50 and 60 per cent more affordable than those of our competitors.
Q: And your dealers?
A: We now have 33 dealers, all with service facilities, and hope to have 40 dealers up and running in the near future.
Q: In which way do you support owners who purchased products from the previous importers?
A: We are contracted by Geely International to support these customers and are doing so.
Q: Are the previous warranties null and void?
A: Yes, that is the problem when warranty funds are kept “in-house”, but we have and will continue to assist all owners with valid problems. At the moment, there are none that we are aware of that remain unresolved.
Q: On that note, you currently offer warranties on your products. Are these backed by Geely in China in order to avoid the situation with the CK?
A: The point that I have to make here is that Geely SA creates a fund for each unit sold and that fund is administered by SA Warranties on our behalf. These funds are contractually placed in trust and actuarial shortfalls must be topped-up by us and any surplus may only be repatriated once the vehicle involved is fully out of warranty. For all claims, the fund makes a claim against Geely International and they refund Geely SA. This is the way most manufacturers do it, although I doubt if all funds are as well secured as ours.
Q: We’ve been to China and have driven and experienced numerous Chinese products. It’s clear it's wrong to paint all Chinese brands with one brush. What makes Geely different?
A: Quite right. It is clear that there are the ‘good, bad and ugly’ among the Chinese brands. Geely is already differentiating itself from the rest when you look at the visible and dynamic quality of the new LC. There are many convincing strategies for the immediate and long-term future, for example Geely’s outright purchase of Volvo Cars from Ford, its investment in R&D capability and the recent purchase of DSI, the world’s second-largest vehicle transmission manufacturer. We are committed to developing our own products and to our own standards.
Q: What lessons do you think the Chinese have learned over the last few years – both locally and globally?
A: The good ones will admit that they underestimated the quality standard for both their domestic as well as export markets. Their entire business culture strikes me as being motivated by a desire to learn, both properly and fast. A great example is the recent adoption of national vehicle safety standards (Chinese NCAP).
Q: Do you think they were caught out by market conditions and the demands of discerning buyers?
A: I think so, although the needs of Chinese consumers, like those of other developing countries, have evolved a fair bit over the last few years. More people can now afford higher-end vehicles, so the market is extremely fluid.
Q: How do you think these experiences have affected their business and product strategies?
A: The other important players are doing it by creating joint ventures in China with established manufacturers. Geely took a different route and purchased Volvo Cars, a highly respected international company. This also allows for fully controlled technology transfer that will undoubtedly help Geely’s cause in the future.
Q: What challenges do you foresee Chinese brands facing in South Africa and abroad?
A: Gaining brand acceptance.
Q: What are the next three steps that Geely South Africa needs to take to ensure success in the market?
A: Firstly, we need to finalise our dealer appointments as well as their continuous training and development. Secondly, we need to build on our after-sales structure and lastly, we need to ensure the continuous introduction of Geely’s latest products in South Africa.
Q: Obviously your brand positioning focuses on value and affordability, but do you see Chinese brands being able to compete on a quality, workmanship and technology level in the future?
A: Not all of them. But we will see it from Geely.
Q: Sticking with products, locally you offer the LC in the A-segment and the MK hatch and sedan in the B-segment. Which other segments will Geely be entering?
A: Geely has an excellent D-segment vehicle as well as a medium-sized SUV that we feel will be well-suited for the local market.
Q: On a more personal note, you’ve held high-ranking positions at both BMW and Nissan. Why this and why now?
A: I had a semi-retirement from Nissan, working on both local and international projects for them. Nissan is a great company and has been very good for me (and to me) and it was certainly not an easy decision to make. I think the pictures of the LC (known as the Panda in China) convinced me to make the move.