Chery Chairman Yin Tongyue admitted to strategic errors made by his company in the past on July 26 in Shanghai. Photos: Courtesy of Chery

Domestic automaker Chery Inc returned to the spotlight on July 26 with its new car model - the Arrizo7, which is the first new product the company has shown since it announced that it would seek a strategic transformation three years ago.

Chery Chairman Yin Tongyue admitted that the company has made strategic mistakes in the past - by putting too much emphasis on sales and expansion, he said last week at the company unveiling of the new model in Shanghai.

"The fundamental reason (for previous setbacks) is that we did not keep a sober mind," Yin said at the press conference.

Still, Chery is hoping the new Arrizo7 - featuring Chery's specially developed technologies, including the 1.6L DVVT engine meant to enhance power - will do something about the company's declining sales. In the first half of this year, Chery sold only 222,800 units of cars, down 16.1 percent compared with the first half of last year.

"After 29 years in the business, I finally dare to say that Chery now knows how to build a car," said a very sure Yin.

Mistakes acknowledged 

Industry watchers also share in Yin's confidence, saying that the vehicle's sporty appeal created by an international design team and reasonable price could also help to sway customers and regain losses in the market.

"Chery's new moves show that its leadership has fully realized their past problems and the company is going toward a right direction," Zhu Bin, an analyst at industry consultancy LMC Automotive, told the Global Times on Monday.

The Anhui-based carmaker was once crowned as the largest homegrown brand in China. Chery boasted the highest sales figures among domestic carmakers in the first several years of the new millennium until it rolled out a multi-brand strategy in 2008.

The multi-brand strategy did not work out well for Chery. The company got too bogged down as it introduced three new brands and ran more than 20 different models simultaneously.

Given the strategic mistakes that led to overwhelming research investments and declining sales - resulting in company losses since 2009 - Chery ranked just sixth in the first half of the year in terms of sales among domestic automakers.

In 2010, deeply troubled Chery committed the company to a three-year strategic transformation, downsizing on research projects and product models before coming up with the "one Chery" strategy in April.

Chery has always positioned itself as a company producing "quality cars affordable to average consumers," but Yin admitted that while Chery has succeeded in affordability in the past, there is still room for improvement in pursuing quality.

The Arrizo7 was launched on July 26 in Shanghai. Photos: Courtesy of Chery

New model brings hope 

In a statement on Chery's website, the company said that its new Arrizo7 model, designed by an international team, is "a quality model that could live up to the standards of joint venture automakers."

Yin also said at the press conference that Chery will run around 10 products in the future, halving that of the over 20 models it ran in the past.

With the new Arrizo7 model priced between 789,000 yuan ($128,607) and 126,900 yuan, Chery plans to target consumers between the ages of 25 and 40.

Zhu from LMC Automotive noted that Arrizo7 models priced under 100,000 yuan are expected to report decent sales as the segment still presents a large market potential.

"One hundred-thousand yuan has been considered a ceiling for the pricing of domestically produced cars. Domestic auto brands should keep their focus on the segment before it has the brand power to raise its product prices," said Zhu.

However, Wu Shuocheng, editor-in-chief of industry information portal gasgoo.com, noted that Chery should avoid going to another extreme when making corrections to the previous multi-brand strategy.

Chery at present has put all of its efforts into promoting its Arrizo7 model, but if the Arrizo7 series does not fall into good favor with customers, there will be no competitive models left for Chery, according to Wu. 

Wu also said that the prices of Arrizo7 models are still a bit high when compared with domestic competitors. Rival products such as Geely's Emgrand EC7 and Greatwall's C50 are about 10,000 yuan cheaper.

Doomed, again? 

When reached by the Global Times, Wang Wei, a public relations officer for Chery, confirmed Chinese media reports that said the carmaker is now operating a new car project in Wuhu's Jiangbei district of Anhui Province, where Chery is headquartered.

According to the media reports, the Jiangbei project may continue on the unfinished car projects at Chery - and use a new brand for them that would be first tested by Chery's dealer networks.

When asked about such plans, Wang said that it was a possible scenario, but added that no such details have been finalized.

Wang declined to provide further information, but according to a Securities Daily report on Tuesday, the Wuhu government is expected to invest 2 billion yuan into the project slated to start operations in 2015, with an annual capacity of 700,000 units of cars.

But LMC Automotive's Zhu warned that Chery could be playing with fire as it is still recovering from making a similar costly play just a few years ago.

"There is little chance that such a new project would work," he said. "These car models failed under the Chery brand and it will be very hard for the automaker to build a new car brand from scratch."

Wu from gasgoo.com also feared that expansion would be a wrong move for Chery, a company that has totaled 2 billion yuan in losses over the past four years.

He added that based on the company's history, it would seem unreasonable for the carmaker to build a new brand now.