Red Flag On the Road Again
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The end of May 2013 was considered a day worth remembering for Chinese automakers. Red flag， a local Chinese high-class auto brand made by First Automotive Works （FAW）， saw its newest member Red Flag H7.
The new car has three models. One is sold at between 300 and 380 thousand yuan while the other two， with larger displacement， are sold at between 400 and 480 thousand yuan.
The new Red Flag made Chinese local-made cars break away from the embarrassment that very few local-made cars are categorized as high-class models. The new model directly targets two well-established foreign brands， Toyota’s Crown and Volkswagen’s Audi A6.
“The long-term dedication of FAW to the resurgence of Red Flag， and our profound understanding of high-class brands give us the confidence to label Red Flag H7 as a match with Crown and Audi A6，” said the spokesman for FAW. “Red Flag has been considered ‘car of the nation’ for 55 years， and now it is time to come back.”
Neighboring Bentley
The confidence of FAW about Red Flag has definitely been transferred to its dealers. 48 hours before the debut of Red Flag H7， Zhu Zhonghua， sales director of FAW’s Longze Store in Beijing， came to the newly-opened outlet， to review the preparation for the new car.
This new store is located in Jinbao Street， one of the most prosperous commercial areas in Beijing. As one of the nine display halls of Red Flag， the new store is unconventionally standing with the stores of Bentley， Royal Royce and Maserati. Opposite the store is a high-class department store where Gucci and other top luxury brands set up their counters.
“I do not know how much money has been invested into the new store. This is my boss’s business，” said Zhu Zhonghua.
But he could tell how much his boss loved the Red Flag brand.
According to him， his boss Wang Longfang once worked for FAW as the sales manager of Red Flag. After departing from FAW， he once invested in the dealerships of Mazda and Toyota， and also worked as the agent for Chinese local brand Pentinum. It is the first time that he invested into the high-class auto brand.
“My boss is very loyal to Red Flag，” said Zhu Zhonghua.“He almost took the dealerships of all FAW’s brands in the past 20 years and has a profound understanding of this company.”
“It is a very good choice for a previous director of FAW to become the dealer for Red Flag， because it can keep the stability of the dealer team，” said a general manager of a Pentinum’s 4S store in Beijing. “I have known Wang for a while. He is a person always knowing what he is doing， and he has the confidence to do well in it.”
It is known that most of the managers in charge of the sales and after-sale services in the Longze Store come from FAW. It is not exaggerated to say that the store is a direct derivative of FAW.
The outlet covers over 470 square meters and is decorated with two main hues： black and red， showing out a grand atmosphere that matches the style that FAW wants Red Flag to have， as well as the company’s vision to restore Red Flag’s image as a high-end auto brand.
The Dream of High Class
The efforts of Wang Longfang envision FAW’s dream of standing along with BMW， Audi and Mercedes Benz in the field of high-class autos. In order to do this， Red Flag must have its own independent distribution channels.
However， as the outlook of Red Flag remains unclear， most investors are cautious enough to refuse a large amount of money into the outlets of Red Flag because of the potential risk. Having no power to raise enough funds to start the nationwide distribution network， FAW made a compromise it chose to set up nine typical outlets， including Wang Longfang’s store， in Beijing， Shanghai and Guangzhou， the most developed cities in China， to show the customers the profile and determination of Red Flag.
These nine outlets are called “Red Pavilion” inside FAW， a typical name in China. On the day of H7’s debut， the nine outlets are open to customers at the same time and with the same style， as FAW required. Ordinary customers can get into the“Red Pavilions” and get the first-hand feelings of Red Flag H7 with the help of professional salespersons.
Apart from Beijing， Shanghai and Guangzhou， Changchun， headquarters of FAW， Zhengzhou and Nanjing are also important cities in FAW’s blueprint of Red Flag’s expansion.
Zhang Xiaojun， general manager of FAW Sedan Sales Co.， Ltd， kept talking to the dealers that Red Flag is sharing the same market with Mercedes Benz， BMW and Audi.
“We’ve emphasized on it in our internal meetings，” said Zhang Xiaojun， “In practice， we require the ‘Red pavilions’to provide the perfect experiences for consumers through products， sales， and services， letting them know our position of high-class and luxury.”
As for how to define the high-class auto brand， Zhang Xiaojun， who had been the sales director of Audi in FAWVolkswagen for six years， explained it from the customer experiences to services.
“The style of our outlets must let consumers feel the high-class atmosphere at the first sight. For Red Flag， the simple combination of black and red， as well as the ceremonial design of the hall， is enough to do this，” he said. “We also require our Red Flag outlets to provide above-average services for our consumers， making them feel more respected and protected when they choose Red Flag.”
“We are positioning us as a rival against Audi，” he added.“But we still hope to borrow the pattern through which Audi succeeded in China.”
The “Car of Nation”
The pattern Zhang Xiaojun referred to is the “governmental purchase”. For long， Audi is considered the most common car for governmental departments. Statistical data shows that 60% of Audi cars sold in China are actually bought as the governmental cars.
Little is known to foreigners that this position used to belong to Red Flag. In 1958， FAW received the order from the central government to develop a Chinese self-owned sedan. Later in the same year， the first Red Flag 770 was driven to the CPC Committee of Jilin， marking the birth of Chinese own high-class auto brand.
However， it was required that all components for Red Flag should be made in China and there was not enough development capital at that time. The low output and slow technological upgrade all become negative factors for the continuous development， even though it was then the car for“central government leaders”.
In 1981， the central government halted the production of Red Flag. By then only 1，500 units had been produced and most of them were sold to the governmental departments.
In the early 1990s， the Chinese government began to deal with the overuse of foreign cars in the governmental departments which caused the servere outflow of national capital. There are voices about the reappearance of Red Flag. Then， FAW began to work with Volkswagen. It introduced and altered the production line of Audi 100， based on which it began to produce sedans branded as “Century Star” and “Nobility”.
This time， the governmental departments were no longer the sole consumers， while private consumers were allowed to buy Red Flag. However， even though Red Flag was considered the “car of nation” and “the sedan carrying Chinese people’s dream of prosperous industry”， very few people chose the new Red Flag because of the high petroleum consumption and frequent errors.
The unpopularity gradually led to the elimination of Red Flag in the market. The second rise of Red Flag was ended even before it fully started.
In 1999， Yan Zhufeng， now the Vice Governor of Jilin， was appointed the general manager of FAW. After saving the company from the nightmare of losses， Yan Zhufeng turned to resurrecting Red Flag， hoping to bring back the glory of “car of nation”. Upon his instruction， FAW imported the platform of Toyota Crown Majesta to build the new Red Flag HQ3.
When the HQ3 came out， FAW announced the return of FAW and its “luxury and high class” in a high profile. However， the high prices and the small sales volume made the third attempt of bringing Red Flag back to life end up with failure too.
An Tiecheng， general manager of FAW， said that Red Flag impressed Chinese people in the early period of its development as the only national car of China. However， after the initial glory， it was gradually forgotten by Chinese people because of the comparatively stagnant technologies and the outdated brand image. Therefore， the resurrection of Red Flag needs to rebuild its brand image as a high-class and luxurious car. Only in that way could it compete with Audi and BMW.
The Uncertain Outlook
Even though the manufacturers and dealers are confident in the successful return of Red Flag this time， can this Chinese local-made high-class auto brand remake its glory several decades ago？
The situation seems to be a strong proof for the positive answer. Early in 2012， the central government has already taken orders to reduce the number of foreign auto brands used by the governmental departments. Then， the government called for the “thrift”， which further required governments of all departments and at all levels to reduce the use of foreign cars.
The “ban of foreign cars” was accompanied by the news that the new Red Flag was coming out soon. From last July， an unseen battle began in the market of governmental cars. Dealers of FAW that have got the dealerships of Red Flag H7， began to promote the new car to the governmental departments.
The H7， whose lowest price is 300 thousand yuan per unit， is said to meet the requirements of “cars for governmental officials” in the shape， quality， displacement and price. In the parliamentary sessions this March， the new Chinese leaders once again put forward the suggestion of “using domesticmade cars more often”.
The effortful promotion of the dealers and the assistance from the government led to the increasing number of orders of Red Flag H7， which is another reason for many people to have faith in its future.
“By now （May 30）， there have been over 1，000 orders of Red Flag sent to our store，”said Zhu Zhonghua. “The Central CPC Committee， the central governmental departments and the state-owned enterprises in Beijing have contributed over 500 orders.”
Zhang Xiaojun said that the brand of Red Flag， which was 55 years old and appeared as the sedan for Chinese presidents in three parade ceremonies in 1951， 1984 and 1999， could give consumers the different feeling of driving.
From the viewpoint of FAW and government， Red Flag seems to have a good future. But how about the ordinary private consumers who form the rudimentary force of the rising Chinese auto market？
“We also received about 50 orders from private consumers，” said Zhu Zhonghua， a number not worthy of boasting compared with the more than 1，000 orders in total. In addition， quite a certain number of private buyers are working for state-owned enterprises.
The Southern Daily made a survey about how ordinary consumers think of the future of new Red Flag. The result shows that 18.9% of respondents believe that the new Red Flag H7 is very competitive in the market； 16.1% of respondents think that the time is needed to review the performance of the new car； 26.2% say that the governmental market will boost the development of Red Flag while 12.69% attribute the success to the market spread. However， 26.09% of respondents say that the new Red Flag will fail anyway.
Interestingly， when the Chinese government issued the order of reducing the use of foreign cars in the governmental departments last July， an ordinary consumer applauded this in front of the reporter from BBC. But when asked whether she will choose to buy a Red Flag car， she said“never”， without any hesitation.
An expert from said that the positioning of the “car for governmental officials” is both advantage and disadvantage of Red Flag. The advantage is that the government could ensure a certain market share， while the disadvantage is that the image as the car for governments might make it elusive to ordinary consumers.
“A man working for a foreign enterprise might not choose Red Flag， not only because of its uncertain performance， but also due to his reluctance to ‘drive the same car with governmental officials’，”the expert said. “In addition， the government-used cars are usually common in the style， shape， interior design， performance and so on， which the individualization is reduced to the lowest level. This further stopped ordinary consumers from choosing Red Flag.”
“Simply replacing Audi with Red Flag in the government is not enough. FAW needs to think of more measures to attract ordinary consumers，” Zhu Zhonghua said.