Case Study Recommendation

Government policies on taxation Hong Kong government has made huge efforts to encourage consumers to use smaller cars and emphasize heavily on fuel efficiency, as well as the interests to protect the environment. Recommendation: The introduction of exemption ‘First registration tax’ for electric vehicles in 2007 is a great opportunity for FAW to form joint ventures with global automotive giants to produce electric cars targeted for the Chinese market.

Toyota is an attractive company to start joining venture with. Since Toyota’s business cornerstone is to protect the environment and their focus in manufacturing plug-in eco-friendly hybrid fits in nicely with Hong Kong government policies. With the exemption of ‘FRT’, Toyota’s hybrid car would be widely accepted by Hong Kong consumers and foresee a growth in demand for the cars. 2. Government policies on emission standard Recommendation:

Hong Kong had strict emission standard that all light cars sold had to pass Euro 4 standards and with the 30% reduction of ‘First registration tax’ for low emission cars, it is a starting point for FAW to manufacture or import low-emission commercial vehicles that can met the required standard. Since pricing is the most influential factor when purchasing of cars, the reduction of tax can significantly reduce the cost burden of owning a car. Riding on this incentive, FAW can enjoy the surge in sales for low-emission vehicles. . Hong Kong consumers had high demand for luxury cars (extracted from Exhibit 5) Recommendation: Hong Kong consumers want luxury cars from reputable brands. Therefore, homemade car brand (Hongqi) may not be as attractive in comparison to renowned brand names such as Audi, Volkswagen. The wealthy consumers prefer cars that are more indulgent, especially for private and younger consumers; they tend to upgrade their vehicles more frequently that can considerably boost the cars sales.

Therefore, FAW can abort the plan to sell homemade cars (Hongqi) in Hong Kong and focus on signing joint-venture contract with world-famous brands. Alternatively, FAW needs to rebuild the brand image of Hongqi and market it beyond business/government sector. Although luxury sedan designs are popular in China, it may not apply to Hong Kong. FAW needs to perform market research in Hong Kong to find out consumers’ preferences, redesign Hongqi cars and launch the marketing campaign before it can gain brand recognition in Hong Kong and accepted by consumers successfully.