Lifan Motors Has a Long Road Vision in Ethiopia


The company is facing fierce competition from used cars, with brands like Toyota remaining popular




Lifan has recently moved into a new plant at the Eastern Industry Zone in Dukem, 37kms outside the capital, Addis Abeba. The company says, however, that it is in business in Ethiopia more as a long-term investment as opposed to an immediate profit, which at present, it is making only from the after-sale service it offers to customers.

Ethiopia, or Abyssinia – as a translation from the Chinese of one of the presentations at its convention last week put it – is, actually a very small market for Lifan. The third Global Distributor Convention of Lifan Motors, organised every three years, took place at the Jiuzhai Paradise Intercontinental Hotel in Juizhai, China, on June 4, 2014. Attending were distributors, dealers and journalists from over 30 countries, as well as ambassadors, including Girma Temesgen, Ethiopia’s Consul General in Chongqing, China, where Lifan Motors is also based.

“When talking about the positive roles played by Chinese partners, it would be unfair not to mention the contribution of Yangfan Motors,” said Girma. “It was the first Chinese private automotive assembling, marketing and after-sale service company in Ethiopia.”

The late prime minister, Meles Zenawi, himself had a great role in convincing the Chinese company to invest in Ethiopia, he later told Fortune. The Company undertakes production in Ethiopia and five other countries, including Russia, Azerbaijan, Myanmar, Iran, Iraq and Uruguay, with Russia serving it with the sale of tens of thousands of cars a year and Ethiopia, according to company founder and chair, Yin Mingshan, with a low market that has stiff competition from old cars. Lifan says it sold 70,000 cars in Russia between 2011 and 2013.

The one-day convention, marked by bold and loud videos of Lifan’s existing and upcoming models, was accompanied by equally bold speeches from Yin and other top executives of Lifan Motors, which tried to elevate the confidence of their partner distributors and dealers, several of whom would be recognised by various awards for their achievements in 2013.

The Company reported, during the convention, that the year 2013 was a time when it achieved a total sales revenue of a little over one billion dollars, “up 23.37pc year on yea, or 7.6pc against the industry average”. That same year, it says it exported 60,000 cars, with its sedans claiming 12pc of the export market in their category. The export volume was 12 times the 4,990 it exported in 2007 – its cumulative exports since then reaching 210,000 cars.

“Lifan motors grew to be the third largest automobile exporter with a self owned brand in China,” said Mark Timber, Lifan Group’s vice president.

Lifan is working to boost its quality and credibility by partnering with the Massachusetts Institute of Technology (MIT), in R&D, and the German, Bosch, for electronic supplies, according to Yin.

The Company, which is listed on the Shanghai Stock Exchange, has 23 plants, with six of them located outside China, Mark said. Ethiopia, one of those countries where Lifan has semi-knockdown or assembly plants, has recently seen a boost with government orders, despite the lukewarm market. It has been delivering 125 Lifan 520 sedans and two X60 SUVs over the past four months, all ordered by the Public Procurement Property Disposal Service

There is production every day at the assembly plant, however minimal, says Biniam Mengesha, sales and marketing manager at Yangfan Motors, Lifan’s Ethiopia subsidiary. The profit making repair service receives up to 120 cars a week at the Company’s two garage’s near Kera, in Kirkos District.

Lifan came into business in Ethiopia in 2007 in partnership with Holland Cars, a partnership that ended on bad terms in 2009. Since then, it has continued solo as Lifan Motors in Ethiopia, while Holland Cars went downhill over the following years, with the founder, Tadesse Tessema, eventually fleeing the country amidst claims of undelivered vehicles.

Lifan has sold about 3,000 cars in Ethiopia since, about 45pc of which were Lifan 520 sedans, according to Yared Seifu, sales and marketing deputy manager at Yangfan. The X60 SUV has sold more than 300 units since its launch in May 2012; this model, first launched in April 2011, had sold 100,000 units by the end of 2013. The company is now receiving orders for the Lifan 530, launched in March 2014, while the 730 is expected to follow, although the date has not yet been fixed for it.

Lifan’s short term plan for Ethiopia includes leasing 10,000sqm of land in Addis Abeba to build its own office and showroom building, says Liu Jiang, Yangfan’s general manager. Although the company has a long-term plan of manufacturing Lifan cars in Ethiopia for export to the African market, current sales of 600 to 700 cars a year and high logistical costs of 3,000 dollars a unit are limiting the company’s ambitions, Liu says, expressing hope that the figure could go down with the Ethiopian Shipping & Logistic Services Enterprise (ESLSE) charging less and increasing sales in the market, which could reduce the unit cost. Lifan’s brand, he says, is not yet strong enough to beat the competition from used cars, with such brand names as Toyota, he adds.

“While customers know the value of a used Toyota car, they cannot put a price to a five year old Lifan car,” he said. “There is also a huge established service capacity for the used cars, which gives buyers a level of confidence in them.”

Both Liu and company founder, Yin, argue that it is the government that has to do something to discourage the sale of used cars in Ethiopia, so that makers of new cars could succeed.

“Ethiopia’s market is not more than 10,000 units a year, and most of it is in used cars,” Yin Mingshan said.

Yin, now 76 years old, established the company after retiring from government work. Now he is building it into a kind of empire with a presence in some 50 countries worldwide. North America and Western Europe are the only markets that Lifan has not yet set foot in. But Yin says his company will venture into both markets in the recent future.

He is said to be prepping his son, Yin Xidi, and daughter, Yin Suowei, both board members in the Company, for leadership positions, although he said during a press conference that he will only let a fit person to take over from him, child or otherwise.

 



By AYENEW HAILESELASSIE
SPECIAL TO FORTUNE-CHINA

Published on June 8, 2014 [ Vol 15 ,No 736]


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