To try and create greater familiarity for those living elsewhere, we’ll periodically profile some China brands and businesses that we believe will be household names across the world soon. In this first post of the series we’ll cover consumer electronics brand Xiaomi (小米）and Roewe（荣威）- a car brand from SAIC Motors.
Xiaomi (小米) is a consumer electronics major that already has a presence in China and India and despite some headwinds in the stock market and in India, is well placed for long term growth
SAIC Motors – better known for their Roewe brand – is one of China’s leading car manufacturers that is also dominant in electric cars and has a presence in overseas markets through the MG brand that it bought from Rover many years ago
Xiaomi
Background and history
Xiaomi is a young company, founded only in 2010. It started as a smartphone company, expanded into building it’s own OS and then started both making and investing in a whole array of products in the IoT sector. Today the Xiaomi brand graces a multiplicity of consumer appliances – rice cookers, water filters, smart weighing scales, air-purifiers and the like – all IoT in nature and building towards the concept of a smart home where every device is connected to the internet to provide a better consumer experience.
Financials
Xiaomi generated a total of 205 billion RMB revenue in 2019 according to its latest financial statements, with a very healthy 28 billion in Gross Profit and 10 billion in Net Income.
Success Factors
Xiaomi first made waves in China as an affordable, no-compromise alternative to the iPhone. Instead of being apologetic about their affordability they focused on being an iconic brand, more youthful and approachable than iPhone – amongst other things Apple had very few stores in China back then and while an iPhone was immensely desirable, a lot of the people who could afford it still couldn’t get their hands on one.
Xiaomi evolved rapidly into an iconic brand in its own right, with its own, very unique minimalist design aesthetic. Instead of being an iPhone imitator or a cheap copycat option, it is now a brand with a loyal following and its own community of fans.
It has expanded into multiple other appliances both through direct manufacturing and through funding other technology startups. Every product that bears the Xiaomi name has the same recognizable design features. It has also consistently delivered better features at a lower price than other brands, making it both cool and value for money.
Expanding into an ecosystem of IoT products has taken the brand in a unique direction towards becoming the arbiter of a smart-home. Their success in India is a bit more traditional, driven mostly by affordable smartphones, but in the process they’ve set up a significant manufacturing base in a second country . Ranked 3rd amongst global smartphone makers in a recent report (https://www.idc.com/promo/smartphone-market-share/vendor) Xiaomi may manage to avoid some of the political headwinds that have hurt Huawei’s business interests overseas and go even higher in the global rankings.
SAIC / Roewe
Background and history
Around 2006, SAIC acquired the MG brand from MG Rover (now defunct) and was also trying to get rights to the Rover brand. When this didn’t work out they came up with a Chinese brand – Roewe (荣威)- which has now become a well-recognized marque in China. SAIC developed the electric and hybrid technology behind the Roewe models. With the 550, 750 and 950 models, they focused on the mid-price and premium car segments in a manner analogous to BMW (3/5/7 series) and Mercedes (C/E/S models) but at lower price points and with more hybrid and all-electric choices.
Financials
SAIC is a mega-corporation with dozens of subsidiaries and JVs with global car brands, so its numbers are pretty staggering. Overall, according to its 2019 annual report it had an operating income of 843 billion RMB in 2019 (down from 902 billion in 2018) with over 35 billion in net operating profit. While about 14 billion of that income (and presumably profit) was from interest, that’s still a reasonable margin for a manufacturing business. SAIC has remained in the top 100 of the Fortune 500 for several years and is the 7th largest car manufacturer in the world as per a 2020 survey.
Success Factors
SAIC is one of the biggest car companies in China, targeting sales of 6.4 million units in 2021 with an electric vehicle target of 768,000. They already sell cars under the MG brand in overseas markets, although overseas sales account for only about 5% of their total vehicle sales of 6.2 million units in 2019. Their aggressive 2021 growth objective of 14% is likely to see a focus on international growth as well and you might soon see Roewe e950s at a charging station near you.
While SAIC started as a typical state-owned enterprise, with a license to print money by handing out JV deals to global auto brands, they have developed the Roewe brand into a strong player in China – with an increasing focus on plug-in-hybrids and electric cars. Given that China is also the world’s leading market for electric cars, players who succeed here clearly have what it takes to do well overseas. Ironically, the fact that they’re smaller in China than BYD may propel them to go global faster, since their focus is on more premium segments with models that will do well globally.
Conclusion
While there’s no saying where these brands will go in the future, they’re both solid businesses with a presence beyond China, some competitive chops and global ambitions. Look out Apple, Samsung, Tesla and GM – the competition is coming.
While our focus as a consultancy is making new brands famous in China, there are many (already) famous Chinese brands that aren’t well known overseas. We will be bringing them to light in this series over time.
If you’d like your brand to be famous and successful in China reach out to us at enquiries@searchlightchina.com – we work with both local startups as well as international brands that would like to do better in this market.