NanjingYiqiAutoTradingCo.LtdINTERVIEWDATE:March14th,2000INTERVIEWERNAME:AnneWangIntervieweeNameMs.RuiXiao-liPositionViceGeneralManagerCompanyandAddressNanjingYiqiAutoTradingCo.Ltd.No.141LianheCun,ShiMenKan,Nanjing210014Telephone/Fax(025)4611910BackgroundKeyProcessesKeyIssuesConclusionsBackground.NanjingYiqiisasubsidiaryofNanjingAutoTradingCo.,ajointventureofNanjing/JiangsuWuziDepartment.In1999,NanjingYiqiisseparatedfromNanjingAutoTradingCo.,andrestructuredintoacooperativefirm.60%oftheinvestmentstillcomesfromNanjingAutoTrading;another40%oftheinvestmentcomefromindividualemployeesandmanagers.TotalinvestmentofNanjingYiqiis3MillionRMB.Lastyear'ssalesperformanceofNanjingYiqiisthebestinEastChinaregion.Totalsalesvolumeisaround1600trucks,aswellas300Jiefangrefittingtrucks.Salesin1998and1997arenotsatisfactory(around100truckseachyear),asJiangsuismainlytheDongfengmarket.25%oftrucksaresoldtoend-users.Other75%oftrucksaredistributedthroughNanjingYiqi's2ndlayerdealers.NanjingYiqihas4subsidiaries,andisplanningtoaddonemore.AsNanjingYiqihasabove60%investmentineachsubsidiary,NanjingYiqicancontrolthesalesactivitiesofthosesubsidiariesdirectlyandconsistently.Thereis"tangiblemarkets"builtineachofthesubsidiaries,whichfacilitatesthesalestoend-users.InventoryofturnovertrucksisstrictlycontrolledinHanjingYiqiHeadquarter.NanjingYiqiisplanningtoexpanditsdirectsalesbusinessinNanjingthisyear.Ms.Ruiplanstoincreasetheratioofdirectsalesfrom25%to50%inordertoraisetheprofitability.Instalmentisconsideredasanimportantmethodtoattractendusers.Lastyear,10%ofthedirectsalesarerealisedthroughinstalment.NanjingYiqi1isplanningtoexpandtheinstalmentpractisetoneighbouringcitiesofNanjingthisyear,e.g.,JiangpuorLiuhe.NanjingYiqiisalsothefirstcompanyinJiangsutolaunch"zeroupfrontpayment"ofinstalment.In1999,grossmarginpertruckis500RMBaveragelyexcludingrebate.Netprofitisaround700RMBpertruckincludingrebate.Profitabilityfordirectsalesis200%ofthesalestodistributors.KeyProcesses/Operations3in1capabilitiesNanjingYiqiplanstoinvest3MillionRMBindeveloping3in1capabilities,aswellasasecond-handautomarket.CurrentlyNanjingYiqihasboughta700M2-landnearby.Allthose3in1functionswillbeputintopractiseinthisyear.Ms.Ruiisnotfamiliarwithservicingindustryandcannotpredictthefuturebusinessvolume.However,shethinksthat3in1functionswillbeveryhelpfultotrucksales,andpredictsthatthe3MillionRMB-investmentcouldbereturnedin2yearsthroughtheincreaseoftrucksales.I.e.,sheanticipatesa150-Million-RMB-increaseofrevenueperyearwhen"3in1"functionsareinplace.InventoryoftrucksismanagedthroughPC.NanjingYiqisetafixednumberofturnovertrucksforeachoutlet.Whenanoutletasksformoretrucksthanthatnumber,theyarerequiredtobuythetrucksthemselves.Re-allocationofturnovertrucksisusuallynotallowedwhenthetrucksaresenttothoseoutlets.Outletsarealsoaskedtobuytheturnovertruckswhenthetrucksarekeptfor3months.Thus,riskofloss/obsolescenceisdisseminatedtoeachoutlet.ThereisregularbusinessmeetingbetweenNanjingYiqianditsoutlets.SalesmanagersandsalesmenarerequiredtoattendthetrainingheldbyNangjingYiqi,andcertaintestisdesignedforthetraining.KeyIssuesMs.RuithinksthatNanjingYiqishouldfindawaytobetterleveragethepotentialofitssubsidiariesandotherdealers.MostofthedealersofNanjingYiqiarelinkedwithpersonalrelationships.MarketofNorthJiangsuisattackedbydealersfromShandongLinyi.DealerfromShandongLinyioffersverylowpricetobothendusersandsmalldealersinJiangsu.Intheprocessofinstalment,whenconductingthepersonalinformationinvestigation,NanjingYiqifounditverydifficulttocollectandtestifytheauthenticity.Therelacksconvincingandadvancedmethodtoinvestigatepersonalinformationefficientlyandeffectively.BigdealersinJiangsuMarkethavereachedconsensusinbalancetheirpricewitheachother.However,theretendstobesmalldealerswhogettrucksfromotherchannels.Thosesmalldealersarewillingtoselltheirtrucksatverylowpriceandforcebigdealerstoinvolveintopricewar.2AsFAWputforwardnewtruckmodelsintomarket,it'snecessaryforFAWtoprovidecertaintrainingandtechnologyinformationtodealerstoimprovethesales.RefittingtruckstendstodisturbthemarketpriceasthosetrucksarecheaperthansimilartrucksofferedbyChangchun,andtheyarealsobrandedJiefang.Whenthereisnewmarketdemand,FAW'sreactionisslowerthanSAWaswellassmallrefittingplants.E.g.,Lastyear,SAW's1.99tontruckgetconsiderablemarketsharefromFAW.ConclusionsAsthebestdealerinEastChinalastyear,NanjingYiqiisconfidentinFAWproducts'futureandwillingtoinvestin3in1capabilities.Still,priceandupdatedproductinformationistwomajorconcernsofNanjingYiqi.3
