Time for Qoros to ditch its global ambition and focus on China
SHANGHAI -- Qoros Automotive Co., a young partnership between China's Chery Automobile Co. and Singapore-based Kenon Holdings, is embarking upon an ambitious plan to reinvent itself.
The company has revised its product plans and shifted its manufacturing footprint within China. And now it has hired a new CEO: Phil Murtaugh, a veteran automotive executive who once ran GM China.
I have some advice for Mr. Murtaugh. He should ditch Qoros' ambitious plan to sell cars in Europe so that he can focus on the company's home market in China.
Qoros produces cars in China and is a 50-50 joint venture between China-based Chery and Kenon, which was spun off from Israeli investment firm Israel Corp. last month.
When Qoros was established in 2007, the joint venture initially planned to sell modified Chery cars under a new brand in China, Europe and North America. That plan was misguided, since Chery's vehicles fell far short of international safety and quality standards.
To its credit, Qoros changed course. The company abandoned a plan to build rebadged Chery vehicles. And it moved its assembly plant from Wuhu -- where Chery is based -- to the city of Changshu, 100 kilometers northwest of Shanghai.
In 2013 the company rolled out its first model, the Qoros 3 compact sedan. One year later Qoros added a crossover, but the company's sales remained stuck below 7,000 vehicles.
That triggered other changes. Qoros has hired automotive veteran Sun Xiaodong as its sales chief and has named Murtaugh its CEO.
Sun was previously head of sales and marketing at Zhejiang Geely Automobile Co. Before that, he was sales chief of Shanghai General Motors Co., GM's passenger-vehicle joint venture.
The new team may help Qoros sell more cars, but only to a limited extent. Despite the flurry of changes, Qoros continues to explore the European market.
In 2013, the company began selling the Qoros 3 in Slovakia. And that's just the beginning, since Qoros expects to sell more than 10 percent of its cars in Europe.
That's an obvious mistake. As a new company, Qoros has little brand recognition. With sales still tiny, the company has incurred heavy losses and a hefty debt.
In the first three quarters of 2014, Qoros lost 1.4 billion yuan ($232 million). By the end of September, its debt approached 8.9 billion yuan, according to Caixin, a Beijing-based business magazine.
With such limited resources, the company should focus on a market that offers the strongest growth prospects. And that market is China.
China's automotive market no longer is expanding at its former explosive pace. But sales of passenger vehicles are still expected to grow 6 percent annually.
Europe's slumping vehicle sales finally stabilized last year, but that market's prospects remain subdued. With a narrow product range and heavy debt, Qoros cannot afford to operate overseas.
Unless Qoros devotes all of its resources to China, the company's reinvention will be in vain.
I have some advice for Mr. Murtaugh. He should ditch Qoros' ambitious plan to sell cars in Europe so that he can focus on the company's home market in China.
Qoros produces cars in China and is a 50-50 joint venture between China-based Chery and Kenon, which was spun off from Israeli investment firm Israel Corp. last month.
When Qoros was established in 2007, the joint venture initially planned to sell modified Chery cars under a new brand in China, Europe and North America. That plan was misguided, since Chery's vehicles fell far short of international safety and quality standards.
To its credit, Qoros changed course. The company abandoned a plan to build rebadged Chery vehicles. And it moved its assembly plant from Wuhu -- where Chery is based -- to the city of Changshu, 100 kilometers northwest of Shanghai.
In 2013 the company rolled out its first model, the Qoros 3 compact sedan. One year later Qoros added a crossover, but the company's sales remained stuck below 7,000 vehicles.
That triggered other changes. Qoros has hired automotive veteran Sun Xiaodong as its sales chief and has named Murtaugh its CEO.
Sun was previously head of sales and marketing at Zhejiang Geely Automobile Co. Before that, he was sales chief of Shanghai General Motors Co., GM's passenger-vehicle joint venture.
The new team may help Qoros sell more cars, but only to a limited extent. Despite the flurry of changes, Qoros continues to explore the European market.
In 2013, the company began selling the Qoros 3 in Slovakia. And that's just the beginning, since Qoros expects to sell more than 10 percent of its cars in Europe.
That's an obvious mistake. As a new company, Qoros has little brand recognition. With sales still tiny, the company has incurred heavy losses and a hefty debt.
In the first three quarters of 2014, Qoros lost 1.4 billion yuan ($232 million). By the end of September, its debt approached 8.9 billion yuan, according to Caixin, a Beijing-based business magazine.
With such limited resources, the company should focus on a market that offers the strongest growth prospects. And that market is China.
China's automotive market no longer is expanding at its former explosive pace. But sales of passenger vehicles are still expected to grow 6 percent annually.
Europe's slumping vehicle sales finally stabilized last year, but that market's prospects remain subdued. With a narrow product range and heavy debt, Qoros cannot afford to operate overseas.
Unless Qoros devotes all of its resources to China, the company's reinvention will be in vain.
