Lifan sees Africa as gateway to world

After being on the road for more than 20 years, car and motorcycle maker is heading for the top, reports Hu Haiyan.

For Yin Minshan, president of Chongqing Lifan Group, Africa offers one of the most fertile land for Chinese private companies' global development.

"I want Lifan to be the best automobile and motorcycle company in the world," Yin said about Lifan, one of the largest motorcycle and car makers in China.

"To realize this goal, we will first enter less developed overseas markets, such as Africa. Brand operating costs are lower there compared with in the United States and the European Union, and that offers us a strong foothold to develop into a global giant."

Yin, 75, said that after gaining brand recognition, the group will venture into developed markets such as the US and the EU.

With nine employees, Yin set up Lifan Group in Chongqing, in 1992 with registered capital of 200,000 yuan (around $36,000 at the time). Now, Lifan is one of the largest motorcycle and car makers in China, with revenue of around of 20 billion yuan ($3.3 billion) last year. The group's listed unit, Lifan Industry (Group) Co Ltd, reported revenue of 8.7 billion yuan last year, little different from the previous year.

The group's African business began when it started selling motorcycles to Nigeria in 1998. Last year, its turnover was $70 million from about 80,000 motorcycles sold to the region. Turnover for cars sold to Africa was $30 million, and around 1,000 have been sold on the continent. Exports to Africa were worth $100 million last year, about a sixth of the group's exports, Yin said.

Those kinds of figures would satisfy many business people, but Yin is preparing for bigger things. He expects Lifan's sales in Africa will keep growing 10 percent annually until 2015.

"Although the increase is not that high, profit is bigger than in most of our overseas markets, such as Southeast Asia."

Lifan works with more than 140 dealers in more than 160 countries and regions in Africa, Latin America and Southeast Asia. The group has set up five factories in Thailand, Turkey, Ethiopia, Uruguay and Vietnam, and plans to open one in Russia this year.

The group's auto factory in Ethiopia, which has 150 employees, has an annual production capacity of 2,000 cars, and the group plans to expand capacity there by building another factory by the end of November, Yin said.

"It's expected that production capacity of our Ethiopian factory will be up to about 10,000 cars a year then, and our sales in Africa will certainly increase based on that expansion."

Chinese firms enjoy many advantages in Africa because the car and motorcycle industries there are similar to those of China 20 years ago, he said.

"Compared with their Western counterparts, African consumers are not that loyal to particular brands. And for most local consumers, Chinese cars are also labeled as high-end ones, similar to the situation when Volkswagen's Santanas was imported to China 20 years ago.

"Africa offers us the time to mature, and our own technologies and brands will no doubt develop as the market grows."

Jia Xinguang, an auto analyst in Beijing, said it is difficult for Chinese car companies to break into developed economies because the auto industries there tend to be developed and mature, and emerging markets such as Africa offer many opportunities for Chinese automakers, "because customers there are not loyal to Western brands".

Most well-known foreign cars sold in Africa have been second-hand ones, because Europe and the US have not given much attention to the market, which offers a great platform for Lifan to develop its automobile industry there.

"Lifan has overtaken Toyota as the biggest in new-car sales in Addis Ababa, the capital of Ethiopia, and you can see our cars everywhere in that city," Yin said.

The sound development of Sino-African relations offers great opportunities for Chinese companies to develop businesses in the region, he said.

Although Lifan started its business with motorcycles, it is investing its greatest efforts in developing the car industry, he says, since it realized that making cars is more profitable, with automobiles costing typically more than 15 times as much as a motorcycle. "We want to transform ourselves into a large car maker, along the lines of Honda of Japan and BMW of Germany."

The group got product permission from the National Development and Reform Commission in 2005 to make cars and in January 2006 produced its first sedan, the Lifan 520.

Last year Lifan's car division accounted for about 53 percent of sales. The company expects that by 2020, revenue from cars will be close to 80 percent of the total, Yin said.

Despite his confidence in Lifan's African expansion, he said some challenges lie ahead.

Lifan's development in Africa is constrained by the continent's underdeveloped industry of vehicle components industry. And some African countries also suffer from political turbulence, which poses challenges for employee safety.

Yet Lifan's biggest challenge in its Africa expansion will be to improve its research and development, Yin said.

"To maintain sustainable development and become the real market leader in that region, it is crucial for the group to develop its own core technologies," Yin said.

Lifan owns more than 6,482 patents and says it spends about 5 percent of its revenue on R&D. The company has also set up R&D centers in Chongqing and Brazil, making it the first private car 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 said.

Lifan has taken many steps to establish its presence in Africa. Most of its strategies are 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, Yin said.

He said more opportunities lie ahead for Lifan to explore in Africa besides developing the export business.

"We are now considering developing our import business, such as importing Ethiopian coffee and selling it to the rest of the world."

Yin has a global vision for his company that is not that far removed from that of his hero Henry Ford, who worked until he was 85. And with Ford's business longevity in mind, Yin reckons he can look forward to at least 15 more years as Lifan's head. "I am still in the prime of my career."

It seems, too, that as part of that ambition and staying power, Africa looms large.

"Our private companies never lack courage, and Africa offers a great basis on which to build our dream."

Contact the writer at huhaiyan@chinadaily.com.cn.

(China Daily 06/18/2013 page16)