When it comes to winning investors’ confidence, sometimes it’s not the product or brand that seems to matter so much as how aggressively you market it.
Shares of China Evergrande Health Industry Group surged 36 per cent in a week after the firm told the Hong Kong stock exchange it planned to change its name to China Evergrande New Energy Vehicle Group to reflect its new focus. The stock is up 250 per cent this year.
The rebranding has been backed by a strong advertising campaign designed to hammer home the shift from hospital and care homes to electric cars, and to convince the public that the name Evergrande – more commonly associated with home building – is now a serious contender in China’s field of Tesla challengers.
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Earlier in August it launched six electric cars, under its Hengchi brand, along with an unusually intense television marketing campaign. Seven different versions of a 30-second advertisement are being beamed into living rooms across mainland China and Hong Kong dozens of times a day, each providing a brief snapshot of the Hengchi 1-6 models.
The ads, which all close with the slogan “Last forever and travel the world” – a loose translation of Hengchi – have been aired on a loop every half an hour on major TV channels like TVB Jade, Hong Kong’s free-to-air channel with the largest viewership in the city, and Dragon Television, a state-run channel in Shanghai.
“Evergrande wanted everyone to know that the company has gone all-in and that it is a serious player in this game,” said Yale Zhang, head of Shanghai-based consultancy Automotive Foresight.
The short, flashy ads are arguably lacking in substance and give very little away about the cars – pricing and availability are among the missing details.
Nonetheless, analysts said the marketing gimmick has accomplished its purpose successfully, pushing home the message that the company, chaired by the third richest man in China, Hui Ka-yan, has firmly made the move into a booming industry.
Chinese Tesla challengers are rushing to grab market share, betting on the rise of the electric vehicle sector.
Xpeng Motors has made a confidential filing for a shares listing in the US, Zhejiang-based Geely Automobile Holdings, which makes the Geometry A electric car, said it plans to list on Shanghai’s Nasdaq-style Star Market later this year. Li Auto raised US$1.1 billion in an initial public offering on the Nasdaq in July and New York-listed NIO shares have tripled in value so far this year.
“They all tried to catch a deadline before the market matured; if products are not ready, then at least eye-catching stories should go ahead,” Zhang said.
Electric vehicle sales in China grew for the first time in 13 months in July on a year-over-year basis, climbing 19.3 per cent to 98,000 units, according to the China Passenger Car Association. Sales are expected to be a “significantly higher in the second half as compared to last year”.
To shore up support for the industry, the National Development and Reform Commission has urged car-restricting cities to increase their electric vehicle plate quotas and offer generous subsidies as part of an economic stimulus policy in response to the virus-hit economy.
But for all the expensive advertising and massive branding initiatives, investors will eventually judge China’s new-energy vehicle makers by the quality of what they deliver.
“Cars are durable goods. Although the money-burning marketing strategy can build up consumer awareness, buyers will not choose it unless [the company] has a solid product,” said Liang Hui, founder and CEO of U Capital. “Equity market investors will eventually turn rational and evaluate a company based on its products and financial books. Faraday Future, for example, has proved that the PowerPoint business model is not sustainable.”
More from South China Morning Post:
- China’s electric car start-ups accelerate plans to grab market share, but mainland Chinese buyers can’t look beyond Tesla
- Xpeng seeks to raise up to US$1.1 billion in New York IPO as electric car maker prepares to challenge Tesla in China