CHINESE ORIGIN, MEXICAN DESIGN, ENGINEERING, ASSEMBLY

Q: What prompted Giant Motors to partner with JAC and introduce a new Chinese brand to the Mexican passenger vehicle market?

A: We understood there was demand for SUVs and decided to target young people and new families with vehicles that offered high connectivity. Giant Motor’s previous investments in Mexico and its ability to adapt vehicles to different markets, coupled with JAC’s interest in building products for the Mexican market and making a long-term investment in the country, prompted us to choose JAC as our partner brand to attack the passenger-vehicle segment. Today, all vehicles leave Giant Motors’ facility in Ciudad Sahagun, Hidalgo, with a Mexican Vehicle Identification Number (VIN), the “Made in Mexico” seal and the necessary local content to compete in the Mexican market.

Q: What challenges has Giant Motors faced when introducing JAC vehicles to the Mexican market?

A: We are focused on developing products specifically designed for the Mexican market rather than just importing vehicles from abroad and pushing consumers to adopt them. This entails significant challenges for Giant Motors and JAC in terms of investment and market research. It took us around two years to introduce the JAC brand to Mexico because the goal was to work with the best distributors in the country and to develop the infrastructure necessary to compete with the best brands already present in the market. Our competitors are not other Chinese brands in Mexico such as BAIC but all light- vehicle brands in the market.

Q: How do Giant Motors and its Chinese partners complement each other’s operations?

A: There are five general steps in an automotive manufacturing and assembly plant: metal pressing, component welding, painting, assembly and component integration. On the one hand, metal pressing, component welding and painting are highly-automated processes that require little labor but need high production volumes to be profitable. Our suppliers and partners in China have experience in these areas as China is the largest automotive market in the world.

On the other hand, assembly and component integration are labor-intensive activities that require product development processes and tropicalization of products in their target markets. Giant Motors adds value in these areas, which is why we invested in the renovation of our facility in Ciudad Sahagun to assemble passenger vehicles.

Q: What is Giant Motors’ strategy to grow the participation of Mexican companies in its supply chain?

A: We have an R&D center solely focused on product tropicalization and development of local suppliers. We have been working for a decade with Mexican suppliers and distributors, as well as with Chinese companies, which has enabled us to accelerate the integration of local suppliers. Giant Motors has gone the distance to develop local suppliers’ capabilities and to help them participate in our manufacturing chain. Entering the passenger-vehicle market has brought new opportunities for our suppliers and our already developed truck assembly operations have made this integration much faster.

Q: What advantages has Giant Motors found in the state of Hidalgo compared to other automotive-intensive regions in Mexico?

A: We established in Hidalgo over a decade ago because the state had developed a strong manufacturing industry oriented to heavy vehicles and had a population with a vocation for truck production that reduces training costs. Additionally, Ciudad Sahagun has good railroad connectivity with the rest of the country, as well as a privileged geographical position that puts us at roughly the same distance between the Pacific and the Atlantic. The Ciudad Sahagun city government is also engaged in attracting and retaining investment. Local academic institutions and the public and private sectors are well-aligned to make Hidalgo an attractive destination for vehicle production.

Q: How do you think Mexican consumers and vehicle distributors will react to JAC vehicles?

A: We expect to reach our sales target of 10,000 JAC vehicles ahead of time because sales have exceeded our initial expectations. As of 1H18, 17 JAC dealerships are operating and by 4Q18 we expect to have 30 dealerships up and running. All 17 distributors involved in JAC vehicle sales have done their part in developing a strong dealership network in the country.

Q: What milestones has Giant Motors reached in its project to develop electric vehicles for the Mexican market?

A: The first prototypes are finished. They deliver the necessary autonomy and have the specific battery, construction, dealership support and security standards that drivers require. The acceptance of this vehicle among taxi drivers will depend on our ability to deliver a monthly cost similar to what they currently pay, plus additional savings in fuel costs.

Giant Motors has the vision of offering users an alternative to fuel vehicles in the commercial passenger and cargo transportation segments that substitute the country’s aging vehicle park. The idea is that people can make a living off these vehicles but the government needs to truly commit to the introduction of electric technologies for these products to succeed. A national plan with clear objectives toward green vehicles is critical for the public to adopt these units. This entails charging stations, easier access to subsidies for electric-vehicle acquisition and lower electricity costs, among other advantages.

Q: What is JAC’s innovation strategy regarding green vehicles?

A: JAC recently signed an association with Volkswagen in China to create a feasible electric vehicle that can substitute a gasoline car. Most brands in Mexico have an electrification strategy in place but the growth of the Mexican green vehicle park will depend on the competitiveness and affordability of these vehicles. If the focus is only on the premium sector, the participation of green vehicles in Mexico’s vehicle park will be minimal. Electric vehicles built by Tesla and German OEMs that are sold in Mexico tend to be recreational units for drivers who also own gasoline-powered cars.

Q: How can Giant Motors’ FAW commercial vehicles add value to your clients’ operations in the cargo segment?

A: Our goal is to produce and market vehicles with the lowest fuel consumption, depending on the amount of cargo they carry. Giant Motors also places a high priority on safety and a long vehicle life cycle. Commercial vehicles are rational purchases, so we need to meet expectations on vehicle safety, cargo capacity, durability, torque and fuel consumption to add value to clients’ operations.

Giant Motors has developed pure-leasing and financing schemes that allow companies to move from gasoline and diesel fleets with eight and four-cylinder vehicles to smaller options that cater exactly to their needs. Furthermore, these vehicles have the warranty and service support that FAW distributors deliver. Giant Motors has also started manufacturing buses. We construct most of the chassis and we are allied with Mexican body manufacturers to deliver vehicles adequate to the needs of Mexican customers.

Q: How has the Mexican commercial-vehicle segment reacted to FAW vehicles?

A: FAW commercial vehicles are leaders in the light-cargo segment. Our main niches are gasoline vehicles with a capacity of up to 1.3 tons and diesel trucks of between 3 and 7 tons. Among our clients are SMEs and mobile billboard companies. The next step for Giant Motors is 177 entering 2ton niche by introducing vehicles with smaller engines that deliver 50-percent better fuel-efficiency than the market average.

Q: How ready is the Mexican market to ditch its stigma regarding Chinese vehicles?

A: Consumers need to ask themselves whether a vehicle made in China is necessarily low-quality. The best way to ditch this stigma is to drive these cars and to consider that renowned dealership groups, financing institutions and insurance companies would not risk their image and prestige by selling vehicles without a solid warranty. There is no place for half-good or half-bad vehicles in the automotive industry. The level of sophistication and quality enforcement common to the global automotive industry means OEMs either comply with the minimum quality standards and are present in the market or they do not. Regardless of their origin, brands that arrive to Mexico have all the technological, endurance and quality needed to compete in the global market.

JAC is a Chinese brand but all the vehicles that Giant Motors produces for the Mexican market are made in Mexico, designed for the Mexican market by Mexican people and using Mexican components. All our JAC vehicles are designed to support a five-year bumper-to-bumper warranty, so all components must meet this standard. In terms of safety, all JAC vehicles sold in Mexico have a five- star NCAP certification. Additionally, we manufacture and have spare parts available in Mexico so no car has to stay in the shop for a month because the component needed is not there.