China’s Brilliance Motors: Edging Closer to European, U.S. Sales
March 14, 2008

By Nick Kurczewski

BREMERHAVEN, Germany — The view from the second-floor corner office is almost as dreary as the weather, which is grey and bone-chillingly cold. There is little to see except empty parking lots and huge rectangular warehouses, from which a forklift occasionally emerges.

Bremerhaven is the new and unlikely European home base for China’s Brilliance Motors, BMW’s partner in China. Professor Hans Ulrich-Sachs, chairman of HSO Motors and the head of Brilliance Motors Europe, is tasked with spearheading the entry of Chinese-built sedans produced by Brilliance Motors into the European market.

Brilliance appears to be edging closer to selling cars in Europe as well as North America with this week’s announcement that investors led by Rocket Capital Investment Group agreed to buy $100 million of the automaker’s stock.

A Shot in the Arm for Brilliance
Rocket Capital Investment Group was founded by Leslie Alexander, owner of the NBA's Houston Rockets; it has invested in numerous Chinese companies, including China Railway Group. The group said its investment in Brilliance is a long-term one.

Brilliance will use the cash generated from the stock sale to expand its production of BMWs in China and production of its own Zhonghua-brand cars, likely for export.

Brilliance Chairman Wu Xioan told reporters in Hong Kong this week the automaker aims to export 15,000 cars this year, half of which will go to Europe. The company plans to boost production 24 percent at its venture with BMW this year. Last year the venture raised output 36 percent to 32,000 cars.

Wu also said the investment may help Brilliance export cars to the U.S. as early as next year. And it will help Brilliance convert rising sales of its own and BMW cars into profits after losses in 2005 and 2006, due largely to the high cost of importing components for those vehicles. The company has not released 2007 results yet. He suggested the investment marks the beginning of a relationship that could involve ventures to finance car sales and sell used cars.

Brilliance’s Sachs: Realistic Expectations
Chinese cars are a hot topic all over the world and Chinese manufacturers can be found at every major international auto show. At the recent Geneva Motor Show, Brilliance had its entire vehicle lineup on display and was touting new distributors who had signed up to sell the cars in Europe. On a neighboring stand, BYD Auto was showing off a dual-mode hybrid sedan, the F3DM. The Shenzhen-based company is the world’s biggest producer of cell-phone batteries, and now hopes to enter the European and American auto market within three to five years. Even the Detroit auto show played host to five Chinese companies that had vehicles on display — though none offered a clear idea as to when and how U.S. sales might begin.

Yet Sachs is savvy enough not to boast of inflated sales expectations and unfeasible production schedules. In the late 1980s, he introduced Hyundai vehicles to the German market. This he followed with a brief spell as board member for sales at Volkswagen, and then a position on the board of Dekra, a German firm that provides technical advice and engineering solutions to the auto industry.

HSO Motors and (for now) Brilliance’s home office in Shenyang, China, have avoided making the same mistakes as some of their predecessors. After all, it was only a few short years ago that automotive maverick Malcolm Bricklin boldly predicted sales of hundreds of thousands of Chinese vehicles in America by 2008.

Brilliance’s European sales goals are currently less than one-tenth of those Bricklin said he’d deliver in the States. By 2010, Brilliance Motors hopes to have sold up to 75,000 cars in Europe. However, even these modest figures seemed impossible when Brilliance’s first European offering, the midsize BS6 sedan, spectacularly failed crash tests conducted by Europe’s largest automobile club, the ADAC.

Failed Crash Test: Disappointing Setback
The BS6 scored only one star out of five, the lowest possible rating. Video of the test spread through the Internet faster than footage of Britney Spears’ latest mental meltdown. But Brilliance fought back, and less than 90 days later the automaker was at the Frankfurt auto show with a revised and structurally improved BS6. The BS6 achieved a three-star rating in recent tests conducted by Euro NCAP.

Sachs doesn’t hide his disappointment in the first round of test results — or his annoyance that the cars used for the first tests were actually pre-production models. The half-hearted efforts of other Chinese car companies at cracking the European market can also get Sachs rolling his eyes in exasperation.

During a short conversation at the Frankfurt show, he spoke frankly about competitors such as China Automobiles Deutschland, a German importer of Chinese vehicles that are near-clones of everything from a BMW X5 sport-utility to a Smart ForTwo and the Toyota RAV4. “Having (China Automobiles Deutschland) here certainly does not help us,” said Sachs with a sigh.

Tempered Optimism
Now, during our most recent conversation Sachs is positively glowing with enthusiasm. Yet when discussing plans for 2008 and beyond, his message remains carefully measured. “It’s much better to grow steadily and not push the market too hard,” he said.

“First we have to establish a serious service organization” for both Germany and Europe as a whole. Lining up new dealerships and distributors is a key part of this equation. Sachs said there are around 75 Brilliance dealerships already slated for Germany. He said the number is growing and set to rapidly expand throughout 2008.

In fact, this year comprises what Sachs colorfully referred to as “the big bang for Brilliance.” No, he wasn't talking about another crash-test gone horribly wrong. What he was referring to is 2008 being a pivotal year, one in which Brilliance establishes a dealership and service infrastructure, gets approval for new vehicles for Europe and introduces three new models.

These include a small sedan, the BS4, as well as the BS3 sport coupe (a handsome little car Sachs jokingly admitted is “better for the image than for the wallet”) and the BS2 hatchback. Of these, the BS2 is the most important. It’s completely new, and set to be Brilliance’s volume seller despite having to compete in Europe’s fiercely competitive small-car segment.

For the moment, Brilliance has surprised many by surviving even this long. But as production and sales ramp up, so do customer expectations — not to mention the expectations of Brilliance executives back in Shenyang. Quality issues have to be addressed. Safety levels certainly need to be improved. New models, especially the BS2, have to be right from the very start of production.

Another BS6 fiasco could sink Brilliance’s European sales for good. And unsubstantiated rumors of a push into the American market as early as this year — about which HSO Motors knew nothing, and a representative of Brilliance Motors in China quickly dismissed — tend to muddy a global game plan that can’t afford to be anything other than crystal clear.

Sachs said compared with where Hyundai was in the late 1980s, he thinks Brilliance is further ahead in terms of quality and that the Chinese company is a quicker learner. It needs to be, as the automotive world isn’t going to slow down and wait for this newcomer to find its footing should it stumble again.

Photos by Brilliance, Nick Kurcewski
1 — Brilliance BS6
2 — Professor Hans Ulrich-Sachs
3 — Brilliance BS2

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