Author: CHUNG Yoon Ngan
Date: 05-14-12 19:49
(This week's issue May 11 - 17, 2012)
Rewards of the journey
May 11, 2012 - 12:30pm http://www.chinadailyapac.com
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Yin Mingshan, president of the Chongqing Lifan Group. (Photos provided to China Daily)
In the bevy of dazzling cars and models at the Beijing Auto Show, it was the somber Lifan 720 sedan that was the center of attention. Sporting a dull black-gray finish, the mid-sized sedan was not exactly a stunner in terms of looks but apparently more than compensated for it with its top-dollar performance and affordable price tag.
To understand the pedigree of the Lifan 720 sedan, one does not have to travel too far. When it comes to pricing and affordability, there are very few companies in China that can match the Chongqing Lifan Group, an automobile company that is also the market leader for motorcycles.
Most of the visitors seemed to be asking what the Lifan was doing in the middle of BMWs, Aston Martins, Audis and Ferraris.
Yin Mingshan, president of the Chongqing Lifan Group, says it is part of the company’s transition from the low-end market to the mid- and high-end markets.
“Till now, most of our vehicles were sold in the low-end market and mostly in second- or third-tier cities. The Lifan 720 is our first attempt to break these shackles and move into the high-end market,” he says.
It is hard to associate the quiet and unassuming 74-year-old president with aggressive expansion and adrenalin in a fiercely competitive Chinese marketplace.
Such skepticism is not new for Yin. Similar doubts were expressed when, at a time that most of his peers were preparing to retire, the then 54-year old decided to seek his fortunes in the automobile industry.
In 1992, with nine employees, Yin started the Lifan Group in Chongqing, Southwest China, with a registered capital of 200,000 yuan (about $36,000 at the time). Nearly 20 years later, Lifan has become one of the largest motorcycle and automobile producers in China. The group’s listed unit Lifan Industry (Group) Co Ltd reported revenue of 8.63 billion yuan last year ($1.37 billion) and a profit of 390 million yuan, a year-on-year increase of 2.19 percent.
Such impressive statistics would keep most entrepreneurs happy. But Yin is preparing for even bigger things.
“I want Lifan to be the best automobile and motorcycle company in the world. To achieve this, it is important for us to expand our presence in the global markets and also make mid- and high-end vehicles,” says Yin, dressed immaculately in a crisp Chinese suit at the well-stocked coffee bar of the Chongqing JW Marriott Hotel.
At the same time, Yin admits that the transformation is not going to be an easy task. “It calls for unimaginable efforts from me and the company to achieve these goals,” he says.
But that does not mean that he is not confident of success. After all, his record is testimony to several years of grit and perseverance.
Growing up in a poor family in Fuling district in Chongqing municipality, Yin started dabbling in the world of business when he was 12. His then job of selling needles was driven by the desire to improve the life of his mother and to pay for his education.
But just when he was ready to enter university, the “cultural revolution” (1966-76) took place and he was forced to work on a farm for about 20 years.
“I spent most of my youth on a farm, and it seemed to be a big waste of time. Fortunately I did not give up my zeal for learning and utilized every opportunity to further my knowledge,” he says.
After donning several hats, including that of an English teacher and editor for a local publishing house, he decided to test his fortunes in the motorcycle industry. And much like his persona, it was a low-key entry with just nine employees and a 40 square meter rented workshop.
“Many people told me that I was foolish to start a business when I was 54 years old. Even my family did not understand me. There was tremendous pressure and I hardly knew anything about the motorcycle business. But at the bottom of my heart, I knew that this was an unprecedented opportunity and I must seize it. My perseverance paid off and I have been able to transform my life,” Yin says.
When he turned 65, Yin was elected vice-chairman of Chongqing municipality’s second committee of the Chinese People’s Political Consultative Conference. It was also the first time that a private entrepreneur was able to hold a deputy minister-level title in China.
For the Lifan Group, Yin says the immediate challenge is to enhance its presence in the overseas markets. “When Lifan was set up, we decided to focus mostly on the domestic market. But we realized that we faced formidable competition in the domestic market from big foreign brands and large State-owned companies. We decided to focus on overseas markets as they offered higher profit margins even though there were stiffer challenges.”
Lifan adopted many measures to establish its presence overseas, with most of its strategies centered on localization, including local hiring and production. In Africa, most of the company’s products are made from heat-resistant materials to combat the hot weather, says Mou Gang, vice-president of the group.
Lifan is now in more than 160 countries and regions, including Europe, the United States, Southeast Asia and Africa, and works with more than 140 dealers. In 2011, the company’s exports reached $636 million and accounted for more than 40 percent of overall sales revenue and 60 percent of its profits. Sales in the US and Europe accounted for 5 percent of the total overseas figures in 2011 and are expected to increase by 20 percent by 2015.
Though exports are the major money-spinner, the company is also sparing no effort to enhance its presence in the domestic market.
“With the dramatic improvement in living standards, the domestic market is also becoming increasingly important for us. In the future, we expect domestic sales to account for 40 percent of the total sales with the remaining coming from overseas markets,” Yin says.
But the real transition would be when Lifan is able to stamp its presence as a company focused on making different types of automobiles.
“Although we started our business with motorcycles, we realized that making cars is more profitable, with automobile costs typically more than 15 times that of a motorcycle. We want to transform ourselves into a large automobile manufacturer, more on the lines of Honda of Japan and BMW of Germany,” Yin says.
Lifan got permission from the National Development and Reform Commission in 2005 to make cars and in January 2006 rolled out its first sedan, the Lifan 520.
The company exported 46,000 vehicles last year.
Yin says that for China’s automobile brands, the biggest challenge is the lack of core technologies. “It is important for companies to develop their own patents and brands,” he says.
Lifan owns more than 6,482 patents and spends roughly 5 percent of its revenue on research and development (R&D).
The company has also set up R&D centers in Chongqing and Brazil, the first private automobile company to have a national R&D center in Brazil. “We are also looking at the possibility of having another R&D center, probably in Europe, by 2015,” Yin says.
Like his favorite businessman Henry Ford, who worked until he was 85, Yin thinks he is not too old to start a new business, and plans to become the oldest entrepreneur globally.
“The oldest entrepreneur till now is someone who is 88 years old. I am still in the prime of my career and I hope to break this record. I hope I can work another 15 years and help make Lifan an international automobile giant, besides being a motorcycle tycoon.”
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