THE OlD RED FlAG

An official blog post claiming that Foreign Minister Wang Yi had chosen the new Hongqi H7 sedan as his official limousine has drawn attention to China’s only indigenous luxury car brand.

Despite strong government backing since its inception in the late 1950s， Hongqi（whose name means Red Flag in Chinese） has fared poorly on the auto market since the 1980s due to the influx of more reliable， affordable and desirable imported brands such as Volkswagen， Mercedes， Toyota， Honda， Ford and GM. Despite an early preference for the Hongqi among China’s elite officials， foreign brands have long displaced the former homegrown sedan-of-choice.

Now， the new H7， a high-end marquee claimed by manufacturer FAW （First Automobile Work Group） to “have the edge” over similar-grade Audi and Mercedes sedans， is shouldering the expectations of those who would prefer China to innovate rather than simply import.

“Independently designed and developed by FAW， the H7 series is of a much higher quality than previous Hongqi models，” Xu Xianping， FAW’s general manager， told a press conference on May 30.

According to Xu， FAW has invested over five billion yuan （US$790m） in the development of the H7 series since 2008， and the company will increase this investment to over 10 billion yuan （US$1.6bn） in the coming years in anticipation of more orders for Hongqi sedans.

Thanks to the unofficial endorsement from the country’s foreign minister， the H7 saw a surge in sales even before Wang was photographed riding in one. Zhang Xiaojun， FAW’s sales manager， revealed to the media that they have received over 1，000 orders from various government departments since the blog post first appeared online. Could this 55-year-old brand， long mocked for imitating foreign luxury cars， be on the verge of a comeback？

Car of Honor

In the eyes of the Chinese people， the Hongqi is more an icon than a practical vehicle. For decades， the Hongqi was the only luxury car seen on China’s roads， and only ever carried the most senior government officials.

“Nobody had seen a luxury car then， let alone made one，” remarked retired Hongqi auto engineer Liu Jingchuan in an interview with Auto People magazine. “What we had was enthusiasm and passion as we were answering Chairman Mao’s call.”

That “call” was a quotation attributed to Mao Zedong： “We should have a brandname car of our own.”

“This was during the Great Leap Forward in 1958， when the Chinese people believed nothing was impossible，” Liu told Auto People. China was on the verge of severing relations with the former Soviet Union its main source of much-needed aid and about to embark on economic， agricultural and industrial reforms that would wreak havoc across the nation， leading to a catastrophic famine and an almost total collapse of domestic industry. Nevertheless， the Hongqi plant was festooned with banners proclaiming “With the East wind and flying red flags， let’s make a car to go see Chairman Mao.”

Having seized an old Chrysler sedan， the task facing the Hongqi engineers was to replicate the foreign car without producing an exact copy. “The factory disassembled the sample car and exhibited the parts one by one in the display window for various workshops to study，” Hua Fulin， a retired Hongqi designer， told Auto Business Review. “The workshops would then call for the part they thought they could handle and copied it.”

An amalgam of the old Chrysler and several other foreign luxury cars donated by Party leaders， FAW people turned out the Hongqi CA72 car within six weeks. The brand soon became well known when a fleet of 10 CA72s made their debut during National Day celebrations on October 1， 1959， ten years to the day since the founding of the People’s Republic of China.

“The car （CA72） was purely made by hand， including the bodywork. We invited a dozen or so senior panel beaters over from Shanghai， though they’d only ever worked on household utensils，” said Liu Jingchuan.“You can imagine how difficult the task was.”

As per FAW’s instructions， the CA72 had strong Chinese features： the radiator’s fan- shaped grille； the moiré-patterned bumpers； the lantern-like taillights； Hangzhou silk brocade upholstery； and a carpeted interior.

Most overt was the Hongqi logo， one red banner on the hood symbolizing Mao Zedong Thought， with a supplementary logo of three red banners on the wheel-arch panels representing the General Line for Socialist Construction， the Great Leap Forward and the People’s Communes the “Three Red Banners” of Party doctrine that would ultimately be abandoned in the early 1980s.

“The Hongqi car is China’s Rolls-Royce，”remarked one Italian commentator when the CA72 was displayed at the Leipzig International Expo in 1960. In the following years， FAW developed more Hongqi models， reducing the seating from three to two abreast and designing bulletproof models. The Hongqi even came up with an ambulance， though most popular were its sedans， used for high-level diplomatic events.

The Hongqi’s world renown was cemented in 1972 when one was used to ferry US President Richard Nixon around Beijing， rather than the customary presidential limousine. Nixon set the standard， and in the early 1970s， all foreign diplomats saw a ride in a Hongqi limousine as one of the three“must-do” parts of an official visit the other two being a stay at the Diaoyutai State Guesthouse and a meeting with Mao Zedong.

Halted

“Is Hongqi better than [Soviet brand] Volga？”

“Yes.”

“Is it superior to [Soviet brand] Jim？”

“Yes.”

“Good. You may make more Hongqi cars. Don’t worry about fuel consumption. Use any alcohol except Moutai liquor as the alternative fuel. Anyway， we have enough sweet potatoes to make alcohol.”

This transcript of a conversation between Deng Xiaoping and then FAW head engineer Rao Bin during an official visit to the FAW factory in 1958 was later held up as an example of Party support for building the Hongqi brand. Deng himself， rehabilitated and resurgent as paramount Party leader after the death of Mao， rode in a Hongqi when reviewing PLA troops in 1984.

However， even Deng’s endorsement couldn’t prevent production at the Hongqi plant from being halted.

“From this June， the production of Hongqi will be stopped due to high fuel consumption，” read a notice in the People’s Daily in 1981.

“This dealt a heavy blow to us Hongqi workers... When we witnessed the disused and disassembled manufacturing equipment， we were too heartbroken even to weep，” former Hongqi plant worker Zhi Bainian， wrote in his memoirs.

While a fuel shortage was the official reason that production was halted， FAW workers knew that the real reason was the massive losses sustained by its parent company. By the time production was halted， FAW had made a total of 1，540 Hongqi cars at a total loss of over 60 million yuan （US$9.5m）. “The cars cost 60，000-200，000 yuan （US$9，524-31，746） each， but the government rarely paid more than 50，000 yuan （US$7，937） per unit. The more we sold， the greater our losses were，” said Han Yulin， a retired Hongqi worker， in his memoirs.

Moreover， quality control issues on the largely manpower-based production line also meant Hongqi sedans were losing out to foreign competition. Little automation meant most of the cars were still engineered and assembled by hand， meaning that they were often unreliable， inefficient and prone to break down without warning.

When then Foreign Minister Chen Yi first rode in a Hongqi car， he found he could not open the door to get out， ultimately having to make an undignified exit by removing the windshield. When Romanian dictator Nicolae Ceau？escu visited China in 1971， the brakes failed on his Hongqi limousine， and the driver resorted to crashing into a roadside mound of lime to stop the vehicle.

Such embarrassing malfunctions led FAW to adopt a unique “parallel systems” approach to design ensuring each system in one of their vehicles had a backup in case of a failure. “We cannot abandon [Hongqi]， but we have to improve its quality，” an unnamed senior official reportedly told FAW leaders in 1983. “We can import foreign technologies to fill this [quality] gap.”

Trailing Behind

According to Li Jun， FAW’s current chief designer， the extent of this “gap” was not revealed until China began to see vehicles from countries beyond the Iron Curtain. While Soviet brands had looked sophisticated， those in the developed world were impossibly far ahead of FAW’s best efforts.

“We felt as though we were on another planet，” Li Jun said of his first overseas factfinding mission. “I could not even understand what [foreign technicians] were saying at the very beginning.”

Relying on imported technology， in 1995 FAW launched its new Hongqi car， the CA7220， popularly known as the “little Hongqi” and essentially a piecemeal rip-off of the Audi 100. “People saw no difference except for the logo，” said Sheng Wei， an auto promotion director in Beijing. “Some customers told me they could even see Audi logos on certain parts of the car. We did not know how to promote it - Chinese features were non-existent.”

Despite the low price tag， the Little Hongqi recorded falling sales year on year， while imports surged in popularity. By 2005， FAW had only sold 12，000 units， less than one- 10th the sales of the Jetta， a popular low-end brand launched in 1991 by the company’s joint venture FAW-Volkswagen.

In an attempt to claw back some of its market share， in 2006 FAW launched the luxury HQ3， but its shameless imitation of the Toyota Crown soon made the new vehicle an object of ridicule. Officials had long since switched to Audi， Lexus and BMW， and only nostalgic collectors were interested in the old Hongqi.

According to media reports， FAW sold only two Hongqi cars in 2011， while at the same time， the Chinese car market， especially the high-end market， was booming， dominated by foreign and joint-venture brands. The media has revealed that in 2012， domestically-made cars accounted for merely 0.2 percent of total auto sales in China in the price category of 200，000 yuan （US$32，000） and above.

A Way Out？

While Hongqi faded， however， two government documents opened up a path to its revival. In 2009， the State Council issued a plan to reinvigorate the domestic auto industry by encouraging the development of domestic brands. Three years later， the Ministry of Industry and Information Technology published a catalog of domestically- engineered vehicles approved for government use to test the public’s response.

At the same time， French President Francois Hollande found himself met on the tarmac by a Hongqi L9. 20 Hongqi H7 cars were also donated to the Fijian government as a goodwill gesture and a bid for publicity.

“[Government officials] should gradually replace foreign cars with domestic alternatives，” remarked Xi Jinping during a meeting in December 2012. “Now that we have our own technology and design， it is not good for us to always ride in foreign cars.”

It is domestic innovation that FAW seems to believe may salvage its brand. On May 28， Hongqi opened its new exhibition hall on Beijing’s lush Jinbao Street. The brand is in good company Jaguar， Land Rover， Ferrari and Lamborghini all have outlets on the same block.

However， Sheng Wei admits that the brand’s future “depends on whether or not Hongqi can restore its former image.” The H7 is already attracting controversy， with many car enthusiasts claiming that the H7 has borrowed extensively from existing foreign models. Even Hongqi designer Jia Yanliang is not sure just how Chinese they can claim the H7 to be. “[FAW] invited foreign designers over to redesign the car and then partly revised the design，” he told the 21st Century Business Herald. “Now the front of the new car looks like the old Hongqi， but its rear half looks like an Audi.”

“My biggest concern is whether the H7 can win over the market by shedding the old Hongqi genes，” he added.

A survey by earlier this year showed that more than half of respondents believed FAW remained dependant on foreign designers， and over 30 percent of those surveyed said they neither care about the brand nor would buy a Hongqi car. A 2012 survey by ， a popular online auto forum， returned similarly dismal results.

“The government does not represent the market. The imperative for FAW now is to make ordinary customers re-acknowledge a brand. That is the only way to have a renaissance，” Sheng Wei told our reporter.