German Engineering for Chinese Wannabes
In most markets, resurrecting a car brand that last built an automobile the year John F. Kennedy became president would appear foolhardy. Unless, it seems, you want to sell in China. Germany’s Borgward Group, the latest aspirant to tackle the world’s biggest auto market, saw its last Isabella coupe roll off a production line in 1961. But with the help of state-owned Chinese truckmaker Beiqi Foton, the revived brand began sales of an SUV last month in Beijing.
Borgward Chief Executive Officer Ulrich Walker is counting on Chinese consumers’ affinity for foreign brands—more than half of new autos sold there last year sported a foreign nameplate—and reverence for German engineering to spur sales. “It’s German DNA, genuine design, long history,” says Walker, a former Daimler executive in Asia who earlier led the Smart brand. “We position ourselves above Japanese and Koreans, but below or close to Volkswagen” and will target well-educated young families who “would be happy to buy a BMW but couldn’t afford it and wouldn’t buy a cheap brand.”
Borgward traces its roots to 1924, when Carl F.W. Borgward, an engineer, designed and built a motorized carrier cycle called Blitzkarren. By the 1950s it was the third-largest carmaker in Germany and accounted for 60 percent of the country’s auto exports. Its best-known model, the Isabella, was introduced in 1954. The family sports car had a 1,493cc engine with an output of 60 horsepower. The company was forced into liquidation in 1961, after sales declined in the U.S.
The new Borgward, reborn in 2008 by the founder’s grandson, is building its first model, the BX7 SUV, at a production line in Beiqi Foton’s plant in Beijing. The line has an initial annual capacity of 100,000 vehicles, which can be increased to 360,000 units. Borgward is still seeking an assembly site in Europe, where it plans to sell plug-in electric versions of the BX7.
The going in China will be tough, because even established carmaker Honda has struggled to make a success of its premium Acura brand there, says John Zeng, an analyst in Shanghai for LMC Automotive. Acura sold only about 4,200 vehicles in China last year. “Premium car brands have a long history. You can’t just repackage a brand that’s been defunct for years and tell Chinese customers it’s a premium brand,” Zeng says. “No one will easily fall for that and make a purchase. You need to have a selling point.”
To improve its chances of success, Borgward studied the experiences of another recent entrant, Qoros Auto, a venture between Israel’s Kenon Holdings and China’s Chery Automobile. When Qoros introduced its first sedan three years ago, it priced the car about 20,000 yuan ($3,072) higher than most foreign mass-market brands. Qoros sold a disappointing 14,001 cars last year vs. the 570,889 vehicles delivered by Volkswagen’s Audi unit in China and Hong Kong.
So Borgward decided to make its first model an SUV to reflect the shift in consumer preference toward more-flexible vehicles, says spokesman Victor Guo. And Borgward set the starting price of its BX7 at 169,800 yuan, or about 15 percent cheaper than VW’s Tiguan, one of the best-selling SUVs in China.
To woo young car buyers, Borgward is offering a 12.3-inch touchscreen control panel and lifetime Internet access for the first 10,000 buyers. The company has signed up 100 dealers and aims to double that number by the end of next year.
While touting its German provenance, the automaker has tapped suppliers around the globe to help keep costs down. Borgward developed the BX7’s engine on its own but is using auto components from Germany’s Robert Bosch and Japan’s Aisin Seiki, working with China’s Huawei Technologies for cloud technologies and South Korea’s LG Electronics for batteries. “We only do in-house what can’t be outsourced,” Walker says, “because although we are a company with heritage, we are also a new company.”
—With Amanda Wang
The bottom line: Borgward, which hadn’t built a car since 1961, is trying to woo Chinese buyers who want German engineering at a bargain price.