BUS489 Report: Analyzing Brilliance Auto's Strategy in China

This report provides a comprehensive analysis of Brilliance Auto, a Chinese automobile manufacturer, including its history, controversies, and competitive landscape. It identifies key local competitors such as Shanghai General Motors, Chang’an, Dongfeng, and FAW, as well as global competitors like Volkswagen, Mercedes-Benz, and Ford. The analysis includes a comparison of market share, financial performance, nature of business, market segmentation, and market capitalization among these competitors. The report highlights the challenges Brilliance Auto faces due to intense competition and the need for continuous innovation to maintain and grow its market presence. The report also touches on the company's struggles with copying international car models and declining financial performance. This document is available on Desklib, a platform offering a wide range of study tools and resources for students.

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Brilliance Auto
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Brilliance auto report
Is an automobile manufacturing firm based in China and headquartered in Shenyang
founded in 1992. The firm manufactures a wide range of products, the products manufactured are
microvans, automotive machineries and auto mobiles. The chief activities of the firm is to design
machineries, develop them to customer satisfaction levels, manufacture of the machineries and
related products and finally selling passenger vehicles under their brand. Brilliance auto group
holds shares in various automotive manufacturing companies. Brilliance auto group holds
42.48% in Bermuda corporations, Brilliance China automotive holding limited which are their
subsidiaries which in turn hold 60.9% shareholdings in Shenyang Brilliance Jinbei automobile
companies. Jinbei designs minibuses, develops them and sells them under Jinbei brand.
The firm and its subsidiaries sell passenger vehicles branded with the brilliance marque
while minibuses are branded under jinbei marque. They sell a range of products of which some
are discontinued, current models in the market include; Brilliance H220, Brilliance H230,
Brilliance H320, Brilliance H330, Brilliance H530, Brilliance H3, Brilliance HV3, Brilliance V3,
Brilliance V5, Brilliance V6 and Brilliance V7. The discontinued models are; Brilliance M1,
Brilliance M2 and Brilliance M3, Brilliance FRV, Brilliance FSV and Brilliance BS2. Brilliance
Shineray a joint between Brilliance automobile and Shineray motorcycle company. They
produce SWM GO1, SWM X7 and SWM X3.
2. Controversies faced by Brilliance Auto
Brilliance Auto has faced a number of controversies since its inception. One of the
controversies is that the company has been accused of copying international car models. In
addition, the company has been experiencing a decline in its financial performance. This decline
in performance has forced Brilliance Auto’s key German partner, BMW, “to increase its stake in

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partnership to 75$ from 50%” (He, 2018). The move for BMW to increase its stake in the joint
venture has raised concerns among investors. As a consequence, various investor banks have
reduced their respective target prices or ratings for the company, including Nomura, Merrill
Lynch, and bank of America (He, 2018).
3.0 Competitor Analysis
3.1 Local competitors
Brilliance auto faces a great competition from the local market especially from state
owned firms. There are four state owned firms that pose competition to Brilliance auto ///. The
four are namely; Shanghai general motors, Chang’an, Dongfeng and FAW. Shanghai automotive
is also referred to as SAIC-GM is centrally located in Shanghai and has merged with US state
owned General motors. This company was mentioned the highest motor vehicle producer in
2017, producing more than 6.9 vehicles. They sell a variety of automobiles including
Roewe,Maxus, MG and Yuejin. Products sold by Shanghai auto motives are under the marque
Baojun, Chevrolet, Ivsesco, Volkswagen and Wuling. Dongfeng auto is a state owned
manufacturing company located in Wuhan. It was ranked the second best Chines automotive
company in 2017. The ranking was based on the volume of products produced, they produced
over 4.1 vehicles in 2007. Dongfen, Vunusia and Dongfen Fengshen are the firm’s brands. They
also have joint ventures such as Honda, Nissan and Dana.
FAW is a Chinese state-owned auto manufacturing firm which has its headquarter in
Changchun. It was ranked the third largest automotive company in China in terms of the output
producing over 2.8 million vehicles. The company sells their products under different brands
such as Basturn, Dario, Haima, Jiaxing, Jilin, etc. Another greatest competitors of brilliant auto
which is not among the big four is the BAIC group. The group is also known as Beiqi, is state

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owned and shareholders of various Chinese automotive manufacturing companies located in
Beijing. It was featured in top four in 2014 in terms of the output whereby they produced more
than 2.5 million vehicles. The fourth state owned firm is Chang’an automobile group. Their
headquarters are in Chongqing, they were ranked the fourth in the total 2007 output selling up to
2.8million vehicles. They sell passenger vehicles under the Chang’an brand while commercial
vehicles under the Chana brand.
China has been named “industry of industries” because of the rate of completion and
market growth rate of automobiles. There is a great competition which makes it necessary for
each company to innovate and come up with new ideas, the competition is what provides
development to China. There is an increased number of auto firms each year, the number of
firms doubled from between 2005 and 2017 as illustrated in the table below

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The high rate of production is due to increased innovative ideas in the Chinese economy,
investors find it profitable to invest in the automotive industry because the industry has a high
purchasing power inside and outside China .Automotive industry has a great influence to the
economy of China, it is among the top best performing companies in the country (Markowski,
2015). Due to this competition, Brilliance auto has to be ever innovating new vehicle models and
producing best and durable quality products.
3.2 Global competitors
Apart from the local market, Brilliance auto faces competition from other global
automotive companies who have beaten them in the market. These global firms have been in the
market for a long time and customers have lived knowing them. The top automotive companies
have grown in the market and their production and revenue is far better than brilliance auto. The
best three countries have giants in the industry, they include The United States general motors,
Fiat and Ford. Germany comes the second with Mercedes Benz, BMW and Volkswagen (Wells,
2015). The third largest auto producer country is Japan which Manufactures Nisan, Toyota and
Honda. These are the best auto companies which have been in the existence and their products
are considered best in the market. Despite of them selling at a higher price compared to
Brilliance auto, customers still find it nice to own these brands. The main reason is for luxury
and legacy. One would rather buy an expensive Mercedes Benz than a Brilliance V7. The output
of these global competitors of Brilliance auto is double that of Brilliance auto.
3.4 Competitor Analysis
3.4.1 Market Share

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As aforementioned, the Brilliance Auto’s 4 major competitors in the Chinese market are
FAW, Dongfeng, Chang’an, and Shanghai General Motors. As of 2015, Chang’an’s market
share stood at 5.7%, an increase by 2.1% from the previous year (Automotive World, 2015).
During the same year, Dongfeng experiences a significant rise in its unit sales although its
market share was less than that of Chang’an. The former’s market share stood at 3.0% as of 2015
(Automotive World, 2015). On the other hand, FAW’s market share was 2.6% while that of
Shanghai General Motors stood at 13.0% (Attias, 2016). Overall, the Shanghai General Motors is
the leading competitor in terms of market share followed by Chang’an, Dongfeng, and FAW,
respectively.
The 3 major global competitors operating within the Chinese market are Volkswagen,
Mercedes, and Ford. Volkswagen’s market share within the market was 14.7 as of 2015
(Automotive Global, 2015) while that of Mercedes and Ford was 18.1% and 4.4%, respectively
(Trofis Team, 2015). As such, it is evident that Mercedes in the leading global competitor within
the Chinese automobile industry.
3.4.2 Financial Performance
Almost all the 7 competitors have been experiencing significant growth in their financial
performance. Particularly, Volkswagen’s vehicle sales volume rose from 3,873 in 2016 to 4,020
in 2017 as shown in Table 1 (Volkswagen, 2018). As of 2015, the unit sales of Chang’an,
Ford, and Dongfeng rose by 34%, 2%, 43%, respectively (Automobile, World, 2015). However,
FAW experienced a decline in its sales volume by 8% during the same period (Automobile
World, 2015). This was due to the financial problems affecting the whole country, the economy
of the market had a poor performance. The current sales volume of the seven automotive

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companies is of noticeable rise, this indicates a growth in the financial sector of the firms
(Kachelmaier, 2017).
Table 1: Volkswagen
3.4.3 Nature of Business
All the 7 conductors specialize in the design, manufacture, and sell of various car models
within the Chinese Market. Each of them manufactures its own unique car models in an attempt
to avoid controversies and patent lawsuits. The companies have specialists who design the
models which attract the market; they found it very profitable to engage in international market
whereby most of their products are sold in local markets. They discovered the power of selling to
a foreigner. Customers find it amazing to own models from other countries (Heneric, Licht, &
Sofka, 2016). Generally the business is more international than local, innovations are embraced
during the design. In comparison to Brilliance auto, there is a variation in the nature of operating
the business. Brilliance auto have not occupied a large market outside China. Their exports are
few compared to the seven giants in the market.
3.4.4 Market Segmentation
Market segmentation refers to the process of subdividing a given market into smaller
segments (groups) on the basis of different characteristics (Markowski, 2015). The global
competitors, including Volkswagen, Ford, and Mercedes have adopted psychographic

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segmentation given that they divide the Chinese market segments based on the consumer’s
lifestyles (Kachelmaier, 2016). As such, they are able to target customers with lavish lifestyles
with their luxury car models. In contrast, the local competitors - FAW, Shanghai General
Motors, and Dongfeng, Chang’an - have adopted demographic segmentation in the sense that
they divide the market segments on the basis of their levels of income. Brilliance auto has not
adopted any market segmentation strategy that can help them increase their sales.
3.4.5 Market Capitalization
Abbreviated as market cap, market capitalization denotes a particular company’s
aggregate market value in terms of dollar amount. Chang’an’s market cap is 8.2, Dongfeng is
8.41 HKD, and FAW is 8.50 HKD. On the other hand, Ford’s and Mercedes’ market cap is
$51.47 billion and $24041 million, respectively (Trophies Team, 2015). However, there was lack
of information regarding the market capitalization of Shanghai general motors.

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References
Automotive World. Vehicles sales ranking in China: Strong performance for domestic brands,
Changan ranked second behind leader Volkswagen. Retrieved on March 25, from
https://www.automotiveworld.com/news-releases/vehicle-sales-rankings-china-strong-
performance-domestic-brands-changan-ranked-second-behind-market-leader-
volkswagen/
He, L. (2018). Brilliance auto shares plunge by almost a third as BMW plans to buy control of
the Chinese joint venture. South China Morning Post. Retrieved on March 25, 2019 from
https://www.scmp.com/business/companies/article/2168249/brilliance-auto-shares-
plunge-almost-third-bmw-plans-buy-control
Trofis Team. (2015). Mercedes-Benz is catching up with competition in China. Forbes.
Retrieved on March, 25, 2019 from
https://www.forbes.com/sites/greatspeculations/2015/06/19/mercedes-benz-is-catching-
up-with-competition-in-china/#1a0e23aa5559
Volkswagen, (2018). Volkswagen Group China. Retrieved on March 25 from
https://annualreport2017.volkswagenag.com/divisions/volkswagen-group-china.html
Attias, D. (2016). The Automobile World in a State of Change. The Automobile Revolution, 7-
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Markowski, S. (2015). China's Automobile Industry: Policies, Problems, and Prospects.Eric
Harwit. The China Journal, 36, 202-204. doi:10.2307/2950405
TIAN, X. (n.d.). Competition and market integration: the case of China's auto industry.
doi:10.14793/econ_etd.11

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Wells, P. (2015). Understanding Change and Difference in the Global Automotive Industry. The
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Harwit, E. (1994). China's Automobile Industry: Policies, Problems and Prospects. Armonk,
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Heneric, O., Licht, G., & Sofka, W. (2015). Europe's Automotive Industry on the Move:
Competitiveness in a Changing World. Berlin, Germany: Springer Science & Business
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Kachelmaier, J. (2016). Automotive Industry Analysis. The Chinese and American Market,
Competitors: The Volkswagen AG. GRIN Verlag.