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Introduction:How did Chery Automobile grow from a small thatched house to a Fortune 500 company in 27 years?

Tian Shanshan | Author Lishi Business Review | Produced by

Heaven moves forward, and a gentleman should constantly strive to improve himself.

In 1996, the Chinese auto market was basically monopolized by foreign or joint venture brands. At that time, there was a popular saying in the auto industry: "It is a fantasy for Chinese people to develop cars independently." At that time, in a few small thatched houses on a wasteland in Wuhu, Anhui, Yin Tongyue, an automotive engineer who had just resigned from FAW-Volkswagen, resolutely joined the impoverished startup company - Chery, starting the journey of China's independent auto brands from 0 to 1.

In 2023, China will surpass Japan to become the world's largest automobile exporter. One of the most important indicators that represents the competitiveness of my country's automobile industry is the export volume of China's own auto brands. At this time, Chery, led by Yin Tongyue, has been the "export leader" of China's own auto brands for 21 consecutive years.

In 2023, Chery Group's total sales volume reached 1.8813 million vehicles, ranking third in China's independent brands, second only to BYD and Changan. Chery's overseas sales volume was 937,100 vehicles, a year-on-year increase of 101.1%, ranking first in the export of Chinese brand passenger cars for 21 consecutive years; its export sales accounted for 49.82% of the total sales volume, a proportion close to 50%, which is extremely rare among domestic commercial vehicle companies. In 2023, one out of every three passenger cars exported overseas in China will be from Chery.

What is even more impressive is that the Chinese automobile market is currently in an awkward situation where "fuel vehicles make money but do not grow, and new energy vehicles grow but do not make money". Chery is currently the only Chinese independent brand automobile company in the industry that has achieved multi-line growth in fuel vehicles and new energy vehicles, both domestically and internationally.

In the first half of 2024, Chery's cumulative sales exceeded 1.1 million vehicles, a year-on-year increase of 48.4%, of which 920,000 fuel vehicles were sold, a year-on-year increase of 35.8%, and 181,000 new energy vehicles were sold, a year-on-year increase of 1.8 times; domestic sales exceeded 568,000 vehicles, a year-on-year increase of 72.2%, and exports were 532,000 vehicles, a year-on-year increase of 29.4%, ranking first in Chinese brand exports. During the same period, China exported 2.793 million vehicles, a year-on-year increase of 30.5%. This means that for every 6 self-branded cars exported by China, one of them is a Chery car.

In 2024, Chery will grow from a small thatched house to a Fortune 500 automobile company. On August 5, Fortune magazine released the list of the world's top 500 companies in 2024. Chery Holding Group Co., Ltd. made its debut on the list, ranking 385th with an operating income of US$39.0917 billion. Chery currently has 14.2 million global users and its business covers more than 80 countries and regions.

Having grown a "small thatched house" into a Fortune 500 company, Yin Tongyue is not proud of it, but has become more sober.

In an open letter to Chery employees, he wrote, "The ranking of the Fortune Global 500 is mainly based on the 'size' of revenue ratio, which cannot fully demonstrate the 'strength' of a company's innovation capability, brand influence, and sense of responsibility... It reminds us to refresh our strategic positioning and goals from the perspective of global operations, the goal of becoming a world-class brand, and the responsibility of a global corporate citizen, and to find the corporate value under the global landscape."

Competition in the global automotive industry is extremely fierce today, and the Chinese auto market is in a "Spring and Autumn and Warring States" stage of life and death elimination. Yin Tongyue emphasized, "Facing an era full of uncertainty, Chery must use long-termism to cross the cycle and become a 'century-old company' with sustainable development."

Chery has been in business for 27 years, growing from a "small thatched house" to a Fortune 500 company. This is a microcosm of China's independent auto brands from 0 to 1, and also Yin Tongyue's exploration of the corporate development path of crossing cycles with long-termism. He led Chery from a "small thatched house" on a wasteland, through four strategic stages, to where it is today.

•From 1997 to 2001, Chery was short of funds, technology and talents. Yin Tongyue purchased product lines from foreign companies, independently learned and developed products, and built factories. On May 18, 1999, Chery's first engine rolled off the assembly line; on December 18 of the same year, Chery's first car rolled off the assembly line.

•From 2002 to 2009, Yin Tongyue implemented the "Copy and Surpass Strategy" to rapidly expand the scale and increase sales through a multi-brand strategy, with the one millionth car rolling off the production line in 2007. However, due to insufficient R&D capabilities, rapid development also brought hidden dangers and new challenges.

• From 2010 to 2019, Yin Tongyue started the strategic transformation, proposed "One Chery", established systems and processes, and determined the strategic transformation and development path of "building comprehensive system capabilities, improving product quality, and creating an excellent brand". Through process reengineering, the dependence on people was reduced; CPS (Chery Production Method) and TPM (Total Production Management) models were established to achieve comprehensive progress in technology, quality, and internationalization, and embark on the development path of quality and brand improvement.

•From 2020 to date, Chery has used Internet thinking and user thinking as the "two wings" to accelerate its take-off, accelerating the layout of new energy vehicles, and also deriving and incubating strategic emerging industries such as new energy, robots, modern agricultural machinery, and general aviation.

Lishi Business Review has specially compiled public media interview materials from the more than 20 years since Yin Tongyue led Chery's entrepreneurship, and sorted out 60 business thoughts to help readers understand the growth secrets of Chery Automobile.

one

About the difficulties of starting a business

1. Choosing a car means choosing suffering and hardship; choosing a car means choosing excitement and glory.

2. If you can’t do it, jump into the Yangtze River. (In 1996, the newly established Chery spent a huge amount of money to sign a contract with a British company to introduce an engine and its production line. The procrastination and arrogance of British technicians seriously affected the progress, causing the project to almost stagnate. When Chery was on the verge of life and death, Yin Tongyue decided to independently complete the assembly and development of the engine production line. On May 18, 1999, Chery launched the first engine independently developed and assembled.)

3. Car manufacturing is a marathon. When accelerating, you must master the rhythm and adjust your breath so that you can run longer. The same is true for the development of an enterprise. You must avoid running too fast.

4. In the past, we said that the automotive industry is a marathon with no end. Now it is not only a marathon, but also a triathlon and pentathlon. Traditional things cannot be abandoned and investment cannot be reduced. New smart cars and autonomous driving technologies still need to increase investment. (Yin Tongyue's speech at the Chongqing China Automotive Forum in 2021.)

5. Over the years, Chery has been moving in its own direction and at its own pace without making any major adjustments. The only major adjustment was the mixed ownership reform in 2019.

6. Chery has always focused on technological innovation, system construction and development of the global market.

7. An enterprise must take control of core technologies and core components; this is the way for it to survive.

8. We are a technology-based company. Our long-term technology accumulation, constantly improving standard system and continuous innovation capability give us confidence. The engine is the core component of traditional automobiles and the "heart" of the car. China's automobile industry was once restricted by engine technology, and Chery was the company that achieved technological breakthroughs and successfully developed the first engine with independent intellectual property rights.

9. "Technical Chery" is Chery's unique strength, and user thinking and Internet thinking are the "two wings" for Chery to accelerate its development.

10. Even if it falls out of the top ten, it must transform. (In 2011, Yin Tongyue insisted on abandoning the multi-brand strategy despite opposition, sacrificing sales, and at the same time invested 2 billion yuan to strengthen the forward research and development system.)

11. Limited by the Miller cycle, the thermal efficiency of the engine is usually only about 20%, while the thermal efficiency of the Alto cycle engine is 40%. Chery's engine thermal efficiency can now reach 48%, which has exceeded the physical limit. How is it achieved? Through continuous technological innovation.

12. Failure is also a kind of wealth for the company.

13. Previously, the company was small and had little accumulation. We started running before we learned how to walk. Now, the company is large and has technical reserves and strength. In the past, Chery had 1,000 to 2,000 R&D personnel, but now it has 20,000 and a more mature team. We have accumulated experience and lessons from our repeated failures in the past. With these accumulations and lessons, we are now starting to expand our product categories, so that Chery will have a three-dimensional brand group.

14. The new media is very efficient in its communication methods. We should make good use of this tool and adapt to the changes of this era. But we should stick to the bottom line when doing so, not attack others, and be self-disciplined and return to propriety.

15. I encourage people below me to use some new marketing models, but they cannot attack others and do not get involved in meaningless verbal disputes. Only speak well of yourself and do not speak ill of others. This is our bottom line.

16. Chery is a relatively stupid company. We put a lot of effort into invisible areas. Most car companies are very smart and put a lot of effort into visible areas.

17. Price reduction is a test of downward capabilities, while car companies need to compete on upward capabilities, and there is a lot of room for upward capabilities.

18. Chinese people like to roll down, not to rush up. Rolling down will eventually lead to unhealthy development of Chinese industry. So we always say "don't share with the weak, only compete with the strong". We want to be an enterprise that competes with the strong. If we compete with the strong, we are the strong. If we share with the weak, we can only be the weak.

19. Without the accumulation of small steps, one cannot reach a thousand miles; without the accumulation of small victories, one cannot achieve a big victory.

20. In the 27 years since its founding, all Chery people have worked hard to prove that even when the outside world repeatedly considers it "impossible", we can still challenge the limits and create unlimited dreams with limited resources. (In August 2024, Chery was listed for the first time on the Fortune Global 500 list, ranking 385th.)

21. We must never relax just because we are in a rapid upward trend, and we must maintain our fear and awe of crises.

two

On strategic choices

22. Compare with traditional European and American car companies in basic skills and systems, and compare with new forces in innovation and agility. (In 2022, Chery's annual car sales will reach 1.23 million units, and its revenue will exceed 200 billion yuan for the first time.)

23. I require the team to learn "double T" for a long time: on the one hand, learn from Toyota, insist on excellence and the craftsman spirit of making things to the extreme; on the other hand, learn from Tesla, break the conventional and subversive way of thinking.

24. We have never thought of opposing oil and electricity. Instead, we would rather integrate the advantages of oil and electricity and let oil and electricity work together.

25. We have our own priorities and pace. Last year (2023), we wanted to make gasoline vehicles solid, because the benefits are really good, especially in the international market where there is a large demand for gasoline vehicles. As for electric vehicles, we were making losses before, which we could not accept. But this year (2024), we can basically break even and even start to make a profit, so we have to focus on it.

26. Just because we don’t make an effort doesn’t mean we don’t have the ability.

27. After 2025 and 2026, Chery will no longer be a follower in the new energy track.

28. If we exchange losses for sales, it actually damages the interests of the company. We cannot accept serious losses in the field of new energy. Therefore, we have been managing the pace of new energy development.

29. We are doing both addition and subtraction. For example, the Xingtu brand cooperated with Huawei and Jaguar Land Rover, which is addition. We took the initiative to cut off the QQ business, which is subtraction, because its market is shrinking.

30. On the one hand, we "add" to the overall brand, increase the brand value and promote the brand upward through category innovation, technological innovation, and ecological innovation. On the other hand, we "subtract" products under each brand, focusing on creating popular products, so that each product has a different design, different technology, and different selling points, bringing users a unique experience.

31. It is not easy to do subtraction. We do not pursue a one-size-fits-all approach.

three

About business operations

32. Enterprises should pursue healthy and sustainable growth. If you use up all your energy at once, it will definitely bring disaster.

33. The essence of an enterprise is to achieve profitability and bring value to society. An enterprise is a carrier of value-added. Only when value is increased and profits are generated can innovation continue.

34. We have a lot of plans, but they are not widely publicized. In terms of electric vehicles, sales are increasing and technology is improving. In addition, our solid-state batteries will be available soon. We have also designed a safety monitoring system for the battery, which can monitor the temperature, resistance, etc. of each battery cell 24 hours a day.

35. All our choices are logical. Sometimes, deliberately emphasizing hot products will lead to huge losses. For example, through price wars, sales have increased, but there is no profit. What is the point of this volume? In addition, arbitrary price adjustments will disrupt our entire pricing system and affect the value of the entire company. So we have to follow the rhythm step by step.

36. We pursue hits, but they must be hits with reasonable profits, which takes time. At the very least, we cannot afford to create a hit at the cost of price.

37. Resources are limited, but innovation is unlimited. How to efficiently match limited resources is very important. For technologies that can be industrialized quickly, we should increase investment; for those technologies that are more difficult and cannot be realized in the short term, we will do some technical research, such as making some samples first.

38. We have broken down more than 20,000 "root technologies", and we need to find people to research each technology. I don't expect to be 100% successful, but if there is a 1% chance of success, we can master more than 200 "root technologies". Through the combination of technological innovations, we can continuously produce new things like a production line, and create products that are different from others.

39. (Chery has made adjustments on three fronts based on its root technology)

The first is product development adjustment. We are constantly improving and enhancing efficiency. In the past, product development took 24 months, but now it takes 20 months or 18 months, and product quality is getting higher and higher. At the same time, we let customers participate in the product development process and make products that customers really need.

The second is the optimization of system processes. Chery used to develop in a V-shaped manner, which was limited to the automotive industry. Now we are developing integrated products, learning from Huawei's approach, which is to open up the system.

The third is to optimize the innovation system. For example, what innovations must come out next year, what technologies must come out, what must be done the year after, what technologies we must achieve and what products we must produce in 5 or 10 years, all need to be planned. Some are done by ourselves within the walls, some are semi-walled, and some are completely open, such as our cooperation with universities and research institutes.

Four

About Enterprise Management

40. What entrepreneurs need to do is to solve problems when they arise, and turn worries into no worries through management innovation and technological innovation.

41. Chery started trying the Amoeba model almost 20 years ago. We first learned from Haier's independent business unit, but found it inappropriate. Later, we saw Kazuo Inamori conducting training in China, and we thought it was a new opportunity, so we made some attempts.

42. Chery is now (2024) using the Amoeba model. All brands have their own business units, each doing their own business. For example, Jetour is a good example. We expect sales of more than 600,000 units this year and 1 million units next year.

43. No management idea can be used directly. All of them must be digested internally, which is also a process of re-creation.

44. The logic of management is the same. In the end it is about managing people, finances, and technology.

45. We call it "TQCD", T stands for technological innovation, Q stands for quality management, C stands for cost, and D stands for delivery. In the past, Chery pursued optimization in these dimensions, but now it is trying to achieve perfection, which has brought about changes in strategy, quality management, R&D system, and supply chain management.

46. ​​Corporate culture is the sum of all soft power in the process of enterprise development. It determines whether an enterprise can be passed on from generation to generation and whether an enterprise will eventually go left or right.

47. The most important feature of Chery today is that it has adhered to Chery culture and constantly interpreted the "Little Grass House Spirit".

48. The innovative entrepreneurial culture with the "Little Grass House Spirit" at its core is the crystallization of Chery's entrepreneurial wisdom and fighting spirit. It will continue to guide and help Chery people to overcome difficulties and continue to defeat all impossibilities.

five

About Chinese Automobile Exports

49. If China wants to transform from a major automobile country into a strong one, it must persist in technological innovation, system innovation and management innovation, and must persist in internationalization and differentiation.

50. Our growth rate this year (2024) may be better than others, not because we are doing better than others, but because Chery's entire market structure is different from others. Chery's overseas sales account for a relatively large proportion, partly because it happened to coincide with the Chinese New Year, but foreigners do not celebrate the Chinese New Year, so overseas sales have pulled up the overall growth rate. (As of 2023, Chery has ranked first in Chinese brand passenger car exports for 21 consecutive years.)

51. In order to implement the localization strategy, Chery implemented the strategy of "prepare food and grass before troops move", and started sales after services, spare parts and personnel training were in place. It also worked with domestic and foreign partners to explore various forms such as auto finance going overseas, overseas industrial park construction, and group investment to explore more business opportunities.

52. In the early days, others did not dare to go overseas, so we went overseas first. Now we see that Chery is doing well in going overseas, and we have accumulated a lot of experience, and more lessons. Now that car companies have started to go overseas, they all come to poach our people or learn from us. We have told others that there are many pitfalls in going overseas, and we should not only see the "thief eating meat" but not the "thief getting beaten". We have been beaten many times to get to where we are today.

53. When Chinese companies go overseas, they should not "eat alone" or be "plunderers" but "fertilizers". We also have competitors in the local market, and we try to avoid them and not touch their markets, and do things that they cannot do, which actually increases our profits.

54. The foreign market is different from the domestic market. Some products are not easy to sell in China, but they are very popular abroad. With the same resources, we first see which brand can stand out and run faster, and then the resources will be tilted towards this brand. So let the bullet fly again.

55. Enterprises (going overseas) must learn to localize and carry out regulatory development, adaptive development, competitiveness development, etc. Otherwise, problems will definitely arise.

56. The road to globalization must follow the principle of "suitable is the best". Different countries have different laws and regulations. Products must be suitable for local laws and regulations and be adjusted appropriately according to requirements. Different countries have different customs, habits and preferences. Enterprises should carry out targeted development according to the needs of target customers. Then provide good services and ensure the supply of spare parts, so that every customer feels that it is worthwhile to choose Chinese brand products.

57. Today’s automobile industry (going overseas) must be vigilant and cannot follow the old path of motorcycles. Many motorcycle companies only care about the present and not the future, only care about the present and not the future, only care about profits and not services, which is very immature.

58. We must clearly see that there is still a huge gap between my country and Western automobile powers in terms of brand building, technological innovation, industry standards, etc., which requires us to learn and surpass them in a down-to-earth manner.

59. Combining Chery’s many years of overseas experience, I believe that the key points are to do four things well: adhere to self-discipline and cherish reputation; change thinking and improve brand; give first and take later and contribute value; open cooperation and share results.

60. In the past cooperation model, we mainly introduced foreign products, brands and technologies. Now, foreign parties often introduce our technology, brands, management and culture, realizing a new joint venture model of "reverse output". my country's auto companies can seize this opportunity to change the single trade form of "Made in China, sold overseas", cooperate with foreign brands in the entire value chain such as talent chain, innovation chain, industrial chain, supply chain, etc., explore the localized business model of "Created in China, Made in China, Sold Overseas", and achieve business entanglement and sharing of results. This is also conducive to accelerating the upgrade of "Made in China" to "Created in China" and climbing to the high end of the global automotive industry value chain.

References:

1. "A letter from Yin Tongyue to all Chery people", August 5, 2024

2. "Sales of 1.1 million vehicles in half a year, exclusive interview with Yin Tongyue: Chery is not yet ready to summarize its achievements", Chinese Entrepreneur, July 2024

3. "A head of white hair, a group of stupid people, and a Fortune 500 company", Xingchang APP

4. "Automobile Observation", Issue 2, 2024

5. "Exclusive Interview with Yin Tongyue: Price reduction is a competition of downward capabilities, while car companies need to compete with upward capabilities", Chinese Entrepreneurs, March 2024

6. "Anhui's old auto industry makes a comeback overseas"

7. From a small thatched house to a Fortune 500 company: Chery's long-termism