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Daniel-Kirchert-Infiniti
Daniel Kirchert, Managing Director of Infiniti China

Infiniti, a relatively new entrant in China’s luxury automobile sector, is growing at a phenomenal pace. Daniel Kirchert, MD, Infiniti China, talks of the company’s China strategy, competition with the German car makers, and the need to become a ‘social topic’ in China.

Infiniti, the luxury car division of Nissan Motor Co., is on a roll in China. Originally a brand created for the US market, Infiniti entered China only in 2007 years after its German counterparts which currently dominate the Chinese luxury car market. Yet in a space of just about seven years, the China market has grown to become Infiniti’s second-biggest market globally and continues to grow at a scorching pace. To put this in perspective, just take a look at its most recent sales figures: in the first six months of 2014, Infiniti China sold 14,000 vehicles, more than double the number for the previous year.

Even though Infiniti has been doing phenomenally well in China, it still trails the big three German carmakers—Audi, BMW and Mercedes-Benz—as well as others like Cadillac, Jaguar Land Rover and Porsche.

The global parent has huge ambitions for the China subsidiary. The company’s President Johan de Nysschen has gone on record saying that he wants Infiniti to increase its sales to half a million a year over the next 4-5 years and the China market will contribute roughly one-fifth of that.

Daniel Kirchert, Managing Director of Infiniti China (and a German and an old BMW hand at that), explains how the company plans to achieve that goal.

Q. Infiniti entered China only in 2007, which is not so long ago, but it has managed to do very well for the global parent. How have you managed this in such a short time frame? 

A. As a new entrant [in China], the first thing we need to do is to let people know about our brand. We have been focusing a lot in the last [few] years to build awareness and let people know the core value of the brand, what makes us different from other established premium brands as the German three. We’ve already seen quite a rapid phase of growth in the last two years. This year we are already coming close to 2% of the market share in the premium sector. Nevertheless, I still believe that we have quite some potential ahead of us. Our market share in the US is around 8%. We will continue to put a lot of efforts in the market and we see much more potential in the future. To build a brand in the Chinese market from a global perspective is the most important priority for Infiniti.

Originally a US-centric brand, going global our vision is to establish Infiniti as a truly global premium brand, No. 4 in the exclusive club, the first three being the three German strong players. To realize this, China is the most important place. We will focus all our efforts on localization in China.

Q. How is your approach in China different from that of the big three German automakers? 

A. The three German brands are very successful in China. They entered China in the 1990s and most of them had more than 10 years of global production. So they have a natural advantage of entering the market early, building the business, and localizing the model. They did a good job in setting up the joint ventures, building the market and they are dominating the market currently. In the premium segment in China, close to 80% is covered by the three German brands. In the US, it’s only 50%. So it’s a very strong position.

The Germans are very good in highlighting their strength in their products in a rational way. We also want to do this but besides that, we want to really position ourselves as a very emotional brand and be much stronger in building a bond with the consumers, not only representing great products, but also representing something to build real relationships with consumers and generating experiences for them. We want to use more emotional marketing.

From the market point of view, a lot of consumers also want to try something new. We are targeting the young-minded premium consumers in China. Saying ‘young-minded’ doesn’t mean the consumers have to be young. These consumers are different. They are changing from the traditional premium luxury consumers in China. They place much more emphasis on individuality. They want to choose a brand which will reflect something for themselves. This is our target group and I think we’ll have a differentiated brand positioning from the Germans with [this] unique group of people.

Q. So this consumer is different from the kind of consumer that BMW and Audi will go after? 

A. This is a very big and fast growing group. It is so big so everyone will go after them. How we position the brand, how we talk to them, will create a brand that can really build great consensus with this target group.

Q. Is the localization you do in the Chinese market very different from what you do in other markets?

A. China is special because it’s the biggest market globally and in the premium market this year China will most likely become the biggest market. It will probably overtake the US in 2014. So if a brand wants to be a truly global player, the road goes to China. Localization in China is of strategic significance.

Consumers in China are quite different from consumers in Europe and the US. Localizing needs to be part of a company’s culture. It means respecting the market and consumers. Because China has the size and big potential, it also means [we have to do local production]. At the end of this year we’ll have localized two of our new models for China.

We are [also] localizing our branding approach. We’ve created a very unique way of expressing our values in Chinese to address our local consumers. We’ve localized the majority of our management team. These are all top people from the industry. They understand the market and the consumers. We also try to have a good corporate culture, get engaged in the society, and get engaged in corporate social responsibility. If you are in the market, you also need to give back something.

Q. To what extent are you present in the hinterland in China?

A. This is fairly important, of course, because China is so big. Our network is around 68 dealers and if you compare this to the three Germans, we are still quite behind them in terms of coverage. We are focusing a lot this year, next year in expanding our network. We planned by the end of this year to have more than 80 dealers and basically every year from the next year we will cover at least 30 more places. In China you need to have geographic coverage. To have people considering buying your product, you need to be close and be able to provide the service to them. So network development is very important. We need to do this not only with the quantitative focus but also a high focus on quality [in terms of] top customer service experience.

Q. How important is your plant in Hubei to the brand in terms of capacity building and leveling up manufacturing quality?

A. We’ll localize two models, Q50L and QX50L by the end of this year. These two segments are very big and fast-growing segments in China: combined, they account for around 40% of the premium segment. They will be the main contributors to bring the volume up for our plant in the next five years. I believe more than 50% of the volume in China in future will come from local production.

Q. Is this factory also shared with Nissan?

A. It’s a Renault Nissan factory which also produces Nissan. This factory for the last years constantly ranked among the global Top 3 in terms of quality. But of course for the localization of Infiniti, we have set up a separate line. We will fully enforce the global Infiniti quality standard.

Q. There are concerns that Infiniti should not be manufactured with Nissan. To what extent do you think this will be insulated?

A. You need to look at the structure of the plant. In the existing Nissan plant, we will set up dedicated facilities for the Infiniti production. On the production side, [we will] enforce our global quality standard and have people trained to do this.

Q. Will China also be a very significant production base for you globally?

A. The local production is planned for the Chinese market only.

Q. The Chinese market, especially in the premium segment, is growing. From Infiniti’s perspective, how are your China operations seen? 

A. In terms of volume, the US is still the No.1 market, and China is No.2. The brand was built for the US market originally. If you look at the future growth, China is clearly the market with the most potential. It’s also reflected in the decision to move Infiniti’s global headquarters to Hong Kong. To build the image of the premium brand first necessarily needs [the brand] to have independence because a premium brand requires different kinds of methods. The move to Hong Kong [also] signifies the attention to the Chinese market: [it is very close to] the mainland China headquarters in Beijing. We are the only global premium auto brand which moved the global headquarters to Greater China. So the headquarters can truly understand and fully support China. This is very different from companies that need to go halfway across the globe.

Globally, they have a very clear vision to build Infiniti into a real member of the club of first-tier premium brands. Our goal for the next 5-10 years is not to attack these German three in terms of volume, but on brand recognition of being a truly global player, an important presence in all major markets. Of course there is a volume ambition too. On the global scale, we want to go beyond half-a-million cars before 2020. China plays a major role. Our goal is to break through another thousand units in the next five years.

To make this come true, we are not focusing purely on volume growth, but also on building the brand. This is a very young brand which appeals to young-minded premium consumers. Our differentiation is being an emotional brand and building consensus with consumers.

At the same time, we need to do a lot of basic work in China—for example expanding our dealer network and providing the best customer service for our dealers, preparing for local production and launching more products. At the global scale, Infiniti will expand [its] portfolio by over 60% in the next five years. Our job, of course, is to make all of those products fit the Chinese market. As we have a long-term vision, it’s not so much what you can achieve in the next 4-5 years. We believe the volume will [come], but we have to really work on the basics to make this happen and make sure [we achieve] more than the target.

[Watch the video below]

Q. Is this shift to Hong Kong also a conscious move to distant the Infiniti brand from the parent Nissan to some extent? 

A. Yes, definitely. I think it’s not so much about the country of origin. Nissan is a very successful brand globally and especially in China, but the premium brand needs to be different. It has different identity, different character. All Infiniti products are developed on its own platform. We use some synergies in R&D and production but the platforms for product substances are very different. Because Infiniti is much smaller than Nissan, to make it successful, it was a very conscious decision to set up separate headquarters, separate management teams to go on this mission.

Q. A recent Reuters piece said that in order to attract Chinese car buyers and better compete with established global premium brands like Mercedes-Benz and Audi, Infiniti is “quietly scaling back its Japanese roots and, in the words of brand president Johan de Nysschen, ‘going global’.” What is the thinking here? 

A. Infiniti was born for the US market. The heritage for us is more of a US brand. Our products from the past were focused on the US market. Since we started the expansion, we took a very global approach. I think the brands need to be international.

Consumers now are changing: from purely looking into the product [they are looking at] the brand and the message behind. For that reason, in future it’s much more important to build your brand in a globalized way. The country of origin will become much less important. Also in consumers’ minds, it’s about having a feeling of what this brand stands for and whether this brand appeals to them.

Q. Is it also spurred by the fact that Japan is not really known for luxury, especially in cars? When we talk of luxury cars, we are more likely to look at German cars or European brands. 

A. Maybe there is a traditional way to look at cars from their country of origin. But I think in future this will change. Brands need to represent something more, in terms of value, in terms of what they stand for. For the young generation, they will not distinguish this so much anymore in the future.

Q. Since we are talking about Japan, some Japanese brands have suffered in China recently because of the political tensions. Have you been impacted at all?

A. Brands of Japanese origin have had some challenges in the last two years. Two years ago we also faced some challenges but we successfully came out of this difficult time last year. From then we really started to enter a new strategic phase of development. The most important thing of this development is to give Infiniti in China a soul and let people understand what it stands for. This is the strategic dimension I mentioned of making Infiniti an emotional brand. Secondly we really have to let people know the brand. I think if you go through with this, this will help us to become China’s No.4 premium brand player.

Q. To what extent is brand awareness a challenge for you? Honestly when we talk about luxury cars, Infiniti is not a name that comes to mind. 

A. That’s true. In the US it’s the opposite. When talking about luxury brands everyone will say, ‘Infiniti’ as it has a good history of over 20 years. But in China it’s not there yet. It’s more important to let people know what the brand stands for and also to let them know what makes you different. Currently this is [our] most important job in China.

We have a few good activities running in terms of increasing awareness. For example, we sponsored a very successful TV show Baba Qu Na’Er (Where are you going, Dad?) last year. To raise awareness it’s important to become a social topic. This show became the hottest TV show in China last year and Infiniti China had a chance to display our great 7-seat luxury SUV. At the same time the show is a perfect match for the brand’s direction. It’s a very emotional show: it shows true emotions between fathers and their kids and how to go for challenges together. That’s exactly what we want our brand to stand for, a reflection of building genuine emotions. A lot of people bought Infiniti immediately after they watched Baba Qu Na’Er.

We are also trying to do this in a not very traditional way. The traditional way may be advertisements. We want to become a ‘topic’. We want to create experiences for people. There is a very popular documentary in China called She Jian Shang De Zhong Guo (A Bite of China), which is about Chinese food and the stories behind that. It’s very emotional because of the unique personalities and stories behind that. We also sponsored this show. This sponsorship provided a ‘platform’ for our dealers to organize similar trips and experiences with customers and prospects to go out and have a unique journey to experience these fantastic places and find out about some of these foods. This had a huge influence and it became a social topic. I think it’s more important than putting your brand logo everywhere. If people talk about it, if they have a great experience, they will talk to their friends. This is a more effective and faster way to raise awareness.

Q. Lexus is also supposed to start manufacturing in China. To what extent will this impact you?

A. For the premium brands in China, there are 10 to 11 competitors and we need to look out for what all our competitors are doing, not only Lexus. We need to see and if they are doing good things we can learn and we mostly have to adjust. But more important is to form our own strength, our own brand, and distinctive positioning and in a few areas maybe we can become the best.

I personally believe that to be successful in China you not only need localization, you also need local production in the premium segment. This is a very important decision for us and we truly believe that this is a step to grow in the market. It will not mean that all our models will be locally produced. Some models will be locally produced but at the same time we will import some other models. Basically no other brand in the premium segment has been able to go beyond 100,000 units without a group production so I think this shows that it’s a very important segment. With our partner Dongfeng, we are very confident that we will make this set-up a successful story.

Q. Going forward, it seems like there is huge expectations riding on you. Your global CEO said that he “wants to boost Infiniti sales to half a million a year in the next 4-5 years with a fifth of those sold in China”. The base right now in China is small. So is that a realistic goal?

A. The goal is to number one, build the brand and make it a top brand here. We have brought forward a very clear strategy. So far it is working and very appealing to the consumers. It’s really helping to raise the awareness, but we need sustainable long term investment to build the brand. This is the most important precondition. We are bringing the product to the market. We are expanding our network. We are doing localization in more and more areas. That’s what we need to do to achieve these other thousand units in China. It’s very challenging, but very feasible. It’s not so important to achieve these things in the next 4-5 years. It’s more important to do these things right.

Q. So you are up to the challenge.

A. Yes. I’m pretty excited about this because it’s a very unique opportunity. Infiniti is a fantastic brand. It’s a very emotional brand. The kind of spirit… we want to represent is on the one side, to dare to challenge and to be brave, the other side representing true emotion. It’s a great brand property. Also trying to establish its own team in the country is very exciting. It’s not always that you have a chance to do something which is very exciting but people also feel the passion for this. The team we are building here is also of diversity. People who joined the Infiniti team, most of them are because they are excited about this challenge. To do something that maybe other people don’t think is possible, to do something really great, and to build the brand more or less from scratch, is a unique chance for someone working in a great company.

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