Government Scrutiny Of Public Spending Could Boost Homegrown Brand This past weekend, the Hong Qi H7, the latest higher-end model from Chinese domestic auto icon Hong Qi (Red Flag), officially rolled off the production line and entered mass production in Changchun, Jilin province. Slated for an October release, the new model is Hong Qi’s first hybrid sedan, with the company claiming its core technologies have been independently developed. (Though the sedan itself is based largely on the made-in-China Toyota Crown manufactured by the FAW-Toyota joint venture.) According to Xu Jianyi, chairman of auto giant China FAW Group Corporation (owner of Red Flag), the H7 is designed to compete with overseas rivals like Audi and Mercedes-Benz, in an attempt to help the brand get a slice of the country’s high-end passenger car market. Owner FAW also plans to invest 10.5 billion yuan (US$1.6 billion) in the Hong Qi brand to develop more models, including SUVs and minibuses, in the next five years. Now, almost half a year after Beijing’s announcement that government offices would be restricted to purchasing only domestic auto brands, the wheels of Chinese auto giants like FAW seem to be turning, albeit often at a slower pace than in the past few (auto-mad) years, manufacturing more premium cars to meet the demands and effects of the edict. According to China Car Times, out of last year’s 18.5 million auto sales in China, around five percent of all new cars were snapped up by ministry level fleets, with a total of 900,000 passenger cars sold to the government. Undoubtedly aware of these statistics, we and many others expect Red Flag to chase government sales with its new H7. Rolling off the production line priced at about 250,000 yuan (US$36,800), the new H7 has a wheelbase of 2970mm and plenty of road presence. For starters, the sedan includes a 3.0L V6, but a smaller four cylinder engine is expected to make an appearance for those ministries limited to big looks and budget performance. The higher-end H7 comes well equipped with every automotive acronym going, a night vision driving system and multi-area air conditioning. But will it be enough for the status-obsessed "red collar" worker, particularly in inland China where scrutiny is less intense? That's something Red Flag -- and its European competitors -- will soon find out.
