Engines restart for 'national sedan' Hongqi

CHANGCHUN - The makers of the Hongqi, or Red Flag, thought they had it made when one of their cars carried then Chinese leader Deng Xiaoping into Tiananmen Square for the 1984 National Day celebrations.

Their achievements, though, were soon overshadowed by the Hongqi's poor sales, as foreign and domestic automakers sped ahead of what was labeled the "national sedan."

To try to regain its fame in the world's largest auto market, China FAW Group Corporation, owner of the Hongqi brand, released a Hongqi H7 model on Sunday to compete with overseas rivals like Audi and Mercedes in the country's high-end passenger car market.

The new model is Hongqi's first hybrid sedan and its core technologies have been developed independently by the company.

The H7 is designed to go up against China-only long-wheelbase European sedans such as the Audi A6L, a popular vehicle for high-ranking Chinese officials. It will be offered with a turbo-charged 2.0 liter, four-cylinder engine developed by FAW.

Born in 1958 as China's prime protocol car, Hongqi has been used by national leaders at major celebrations, as well as to transport important foreign guests including US president Richard Nixon during his ice-breaking visit to China in 1972.

But the glory of the brand was tarnished as FAW was ordered by the government to cease production in 1981 because of high fuel consumption and costs. It had produced 1,540 sedans by then.

During that era, making money was not the major target for FAW. It made the cars mainly for official use, even operating at loss.

In the 1990s, when China's opening-up policy swept across the country, FAW managers tried to revive the Hongqi brand and make commercial gains by introducing two models produced in partnership with Audi and with Chrysler engines.

However, an outdated model, uneconomic fuel consumption, high pricing and positioning as a vehicle for official use left Hongqi lagging behind foreign firms like Volkswagen and Toyota.

The lack of success even forced Hongqi to once again cease production for a spell.

FAW did not give up on the market and had another try in 2006, introducing the high-end HQ3, produced with help from Toyota.

However, the copycat of the Japanese automaker's Crown Majesta did not win customers' hearts. The HQ3 was sold at 399,800 yuan ($63,260) to 688,800 yuan in 2010, almost equivalent to its prototype.

"Insufficient system support within the company and lack of independent development capabilities led to difficulties in FAW exploiting the market," says Zhang Pijie, general manager of FAW Car Co., Ltd.

The Hongqi H7 stemmed from a "Hongqi Revival" project launched by FAW in 2008, which has seen 5.2 billion yuan pumped into the research and development of the new hope.

The H7 has its own chassis, engine, active cruise system and advanced discharge technologies.

With an annual production of 30,000, the H7 is designed to cater for ministerial-level officials at first, according to FAW. But there are doubts as to whether the company can make profits from such a minority.

"There are mere hundreds of ministerial-level officials in China. That is not enough to support Hongqi's future operation," according to Jia Xinguang, chief analyst of the China Auto Industry Consulting Development Company.

The FAW management team realize they can not rely on only one model. It is planning to invest 10.5 billion yuan in Hongqi to expand its product portfolio to variants including an SUV and minibus, in the next five years.

The building of a sound sales network is also key to Hongqi's revival , notes Xu Shili, deputy head of FAW's planning department.

The number of Hongqi service centers has dropped drastically in recent years. FAW plans to revive the network and give customers a free 100,000 km or four-year maintenance deal.

Hongqi faces tough competition from century-old Mercedes, BMW and Audi cars. Customers need time to accept the newcomer even though it is an old brand, says Xu, adding more optimistically that a new group of customers, who are rich but dislike foreign brands, has emerged in recent years.

They are the major customers for Hongqi as it reenters the market, he explains.

Zhang Wen is a prime example of this target consumer - a Land Rover driver in his forties, he manages a private company in Jilin province. He drives a Landrover, but pins high hopes on the Hongqi H7.

"There are no high-end domestic cars. The imported ones are good in function but they do not make me feel good," Zhang says. "A domestic luxury car will give you a special sense of confidence, especially when discussing business with my foreign clients."