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Hongqi

Hongqi: from Mao to Xi

2020: Volume 19, Number 3
1. Editor’s Note
2. Scholars or Spies? U.S.-China Tension in Academic Collaboration
3. A Relationship on a Pipeline: China and Myanmar
4. Business Angels’ Investment Strategies and Organizational Change in China
5. Hongqi: from Mao to Xi
6. Some Unanswered Questions About the Shanghai Jewish Experience
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On September 3, 2015, the Commemoration of the 70th Anniversary of the Victory of the Chinese People’s War of Resistance Against Japanese Aggression and The World Anti-Fascist War military parade was underway on the Chang An Street in Beijing. It was the first major military parade since Xi Jinping came to power in 2012. It was, of all things, a coronation. As Xi was riding out in a brand new black, open-top Hongqi CA7600J L5 parade vehicle manufactured by the First Automobile Works, it was supposed to be the career peak moment of the company president Xu Jianyi.

Xu was born and raised in the FAW. His father, Xu Zuoren, was a founding member and deputy director of the company. Xu Jianyi was born in 1953, the same year that FAW was founded. His father named him Jian (build) Yi (first) after the First Automotive Works. As a “second-generation FAW,” he got promoted quickly through the ranks after starting to work at the company in 1975. Xu spent at FAW for 36 years, his entire working life except for four years when he worked as a mayor in local government. From 2010 to 2015, he was the president and party secretary of the FAW Group. Instead of receiving compliments on Hongqi’s success in the new era, the man who was born to rule FAW was placed under Party detention and investigation in March 2015. He must have wondered where it all went wrong.

The story of Xu Jianji and the automobile maker he helped build is more than an epic tale of rise and fall and personal sacrifice. It is a window into how state-owned enterprises have evolved through the historic upheavals that have marked China from the founding of the People’s Republic until now. This essay then offers a brief introduction to the history of Hongqi from Mao to Xi.

Former chief Hongqi designer Chen Zheng also was swept away by stormy political winds. Inspired by fashionable Italian cars, Chen made the 1962 Hongqi CA72 model slimmer, flatter, and sportier by virtue of exterior design changes. The new look, however, only brought him misfortune. His father, Cheng Ke, had been mayor of Tianjin before 1949.  Cheng Zheng was a car enthusiast and an artist who bought a secondhand motorbike and rode around the countryside, finding inspiration. But his family background helped earn him a conviction for designing a “flat belly car” that was “a vicious attack and mockery of the Great Leap Forward movement and the great famine.” He was also criminalized for being a “hypocritical person living the Western lifestyle.” He and his sample car were paraded through the FAW and subject to public criticism. His wife very publicly divorced him because of the political pressure, and he was sent to the assembly line as a cleaner.

Consecration: Hongqi and FAW from 1956 to 1984

The First Automobile Works was the first major state-owned automotive manufacturing company in China. Its purpose was to manufacture military and industrial trucks. In July 1956, the first Jiefang (Liberation) truck rolled off the assembly lines. Chairman Mao was pleased after the presentation of the truck in Beijing and said, “It would be great if one day we could ride in our Chinese manufactured saloon car to attend meetings.” It was the beginning of the consecration of FAW and the Hongqi model.

In 1957, the Chinese central government ordered FAW to manufacture a saloon model for the national leaders. After collecting information on the most advanced modern luxury saloon cars available in the 1950s, FAW chose to reverse engineer the Simca Vedette and the Mercedes-Benz model 190. The result was China’s first indigenous saloon car; the Dongfeng CA71 manufactured in 1958. The model was named Dongfeng (East Wind) based on the quote from Mao’s speech in Moscow: “The east wind prevails over the west wind.” Initially, the Dongfeng’s nameplate used the Roman alphabet, but Beijing urged FAW to change it to Chinese characters handwritten by Mao and add a company logo to the side of the car written by Mao. In 1958, FAW top managers Rao Bin, Shi Ruji, and Li Lanqing took the Dongfeng CA71 to Beijing to present it outside Huairen Hall, Mao’s residence. All national leaders were summoned to view the car.

During the presentation, Premier Zhou Enlai opened the hood and asked, “I heard this engine is copied from Mercedes-Benz model 190, right?” Shi Ruji answered, “Yes.” Zhou said, “All major automotive brands copy from each other. But we need to do it cleverly, and we have to make some changes; if we copy the engine exactly, they would be unhappy. For example, we can change the shape of the valve chamber cover.”

This was the moment of consecration of FAW and service to Mao directly. The marriage made FAW – and later the Hongqi model – sacred, a political symbol of the state-owned economy. FAW managers, engineers, and workers were not only manufacturing cars, but they are the direct servants of Mao. These were not mere cosmetic honors but actual political assets that had brought personal advancements and tragedies to FAW managers and engineers.

From 1953 to 1956, FAW sent around 500 engineers to the Soviet Union. Many of these engineers were promoted to important positions later on. Two eventually became top party leaders. Li Lanqing served as Vice Premier of China from 1998 to 2003. Jiang Zemin became the Party General Secretary and the President of China from 1989 to 2003. During Jiang’s 15-year presidency, he paid official visits to FAW three times. He often called himself  “an FAW man.” He took countless official photos in the same spot beside Chairman Mao’s handwritten inscription stone of FAW.

Only 30 Dongfeng CA71 model cars were ever manufactured. As a vehicle for Mao himself, the model used the best possible material, such as silk brocade seats, velvet ceilings, wool carpeting, lacquer-wood control panels, carved ivory switches, and cloisonné smoking utensils. However, it was not a reliable car. It broke down frequently. The reverse engineering methods used to make it were crude, reflecting China’s lack of technological and manufacturing knowledge. But the Dongfeng laid the foundation for the development of the Hongqi model. At the height of the Great Leap Forward movement in 1958, FAW announced a plan to build a more luxurious saloon car 90 days after the first Dongfeng CA71 model was manufactured. The idea was to produce a completely new model with better performance and reliability within a month. FAW engineers based the design of Hongqi model on a 1955 Chrysler Imperial bought from the Yugoslav Embassy in China and borrowed from the Jilin Institute of Technology. The most challenging part of making the Hongqi model was reverse-engineering the V8 engine.

Soviet experts had told FAW engineers to give up on the V8 engine design because even the USSR could not produce an eight-cylinder engine in 1958. This inspired FAW managers and engineers, and they set out to prove they could do what the mighty Soviet Union could not. The plan: hand-cast 100 engine blanks based on the Chrysler engine, choose the three best ones and assign each to a team of engineers and craft workers, who labored day and night for two weeks to hammer out a prototype. The best one was picked to put in the experimental CA72-1E model. In August 1958, after 33 days of intense work, the first Hongqi model was manufactured. It was named Hongqi (Red Banner), meaning the car was designed and built “holding the great red banner of Chairman Mao’s Thoughts up high.” Within two months, FAW produced a convertible version of the CA72 model for the 10th national day military parade. These were abnormal model development time frames with unusual methods of production. It was a lavish sacrifice to support Mao’s Great Leap Forward movement.

Engineers at FAW had spent a year testing and upgrading the design of the CA72 based on two other advanced saloon models, the Cadillac Fleetwood and Lincoln Continental. The finalized version was manufactured in August 1959. The design of the CA72 model was classic with strong Chinese elements. The design was a mixture of imperial residuals and Communist political symbols, such as the fan-shaped grille and the Chinese royal lantern-shaped taillight. There were five little red flags representing worker, farmer, merchant, student, and solider on the side of the car. In 1960, FAW designed a three-row CA72 model that carried three little red flags representing the General Path, Great Leap Forward, and People’s Commune, representing Chairman Mao’s three key political philosophies in 1960.

In September 1964, the Hongqi model was declared China’s “National Car.” It became the official vehicle for national events, diplomatic missions, and national leaders. However, the Cultural Revolution severely curtailed the production of Model CA72. Only 206 units were ever produced. In 1965, a new Hongqi CA770 model was designed by Jia Yanliang, who was just 25 years old. It contained a redesigned exterior and engine. The new engine was based on Cadillac V8 engines with two-speed automatic transmissions. Party leaders directly participated in the design of the car to add more luxury features. In 1966, the first 52 units of the Hongqi CA770 model were transported to Beijing and distributed to national leaders with interior colors of their choosing. In 1969, the first Hongqi CA772 bulletproof model was manufactured. The development team was led by Mao Weizhong, from the Central Security Guard Bureau of national leaders. Other team members included military experts in bulletproof armor. The model contained 6mm bulletproof armor, 65mm bulletproof windows, and tires that could run 100 miles after bullet penetration. The car weighed 4.92 tons and was regarded as the safest car in the world in its time. The Hongqi CA772 model earned an infamous part in Chinese history as Chairman Mao’s appointed successor, General Lin Biao, fled in it to the airport in 1971. Bullets fired by guards only scratched the surface of the armor.

It was the height of glory for Hongqi. However, just like CA72 and its designer Cheng Zheng, the sacred status of Hongqi also brought tragedies to its designers. The initial design had three red flags on the side of the CA770 model representing “Mao’s General Line, Great Leap Forward and People’s Commune.” Beijing Mayor Peng Zhen suggested that FAW change it to one big flag representing “Mao Zedong Thought.” During the Cultural Revolution, the single-flag design became the basis for one of Peng Zhen’s criminal charges and evidence that he had attacked “Great Leap Forward and People’s Commune.” Hu Yuyong, the general manager of FAW, and Jia Yanliang himself were publicly criticized for cooperating with the criminal Peng Zhen. Jia was expelled from the position of chief designer of Hongqi until 1972.

The development of Hongqi CA773 model started in 1968. However, the FAW saloon car development team was abolished during the Cultural Revolution, and all engineers were sent to work in the factory as assembly workers. Workers on the assembly line took over the job to develop the Hongqi CA773 model. These barefoot doctors of the factory floor demonstrated the foolishness of favoring “red” over “expert.” The Hongqi CA773 model was in production from 1969 to 1976, but due to various design faults and quality issues, only 291 units were produced in seven years.

Hongqi development resumed in 1972. FAW engineers began designing the CA774 model. The development team was led by Jia Yanliang, the designer of the CA770. The idea was to catch up and overtake the most advanced saloon car in the world. To achieve that, Jia designed four sample models in 1975 with bold changes from previous Hongqi models. The new design was advanced and modern and included the use of arc-shaped side windows to improve aerodynamics. The car body was made of high-strength steel sheets to reduce weight. It was the first time a Chinese automaker had used a modern monocoque body frame design. However, the design conflicted with some functions of the car. The aerodynamic shape was regarded by some officials as lacking in solemn status compared to the old square shape. There were safety concerns about the big, transparent car windows that overexposed passengers and officials rejected the most modern, bold Hongqi CA774 model. The attempt to upgrade the Hongqi failed. Its symbolic and sacred status as Mao’s car prevented its modernization. In 1976, FAW made an unsuccessful attempt to upgrade the Hongqi model by seeking joint development with Porsche. In 1976, Chairman Mao died. The central government ordered FAW to create a vehicle for the Chairman Mao Memorial Hall to carry the Chairman’s corpse in case of an emergency. It was the last Hongqi made for Mao.

The Weakened Hongqi in the 1980s

In 1979, FAW resumed the development of the CA774, with Cheng Zheng came back as the chief designer. After the Cultural Revolution, his design turned conservative, back to a non-bearing body system with reduced window size to comply with the government’s safety requirements. But the central government had lost interest in new Hongqi models, and Cheng’s design was never manufactured. As a highly politicalized symbol that was closely associated with Mao, the sacred status of Hongqi faded temporarily with Mao’s death.

With economic reforms undertaken by Deng Xiaoping, the technology gap between state-owned auto manufacturers and the international automotive industry became apparent. Top Party officials started to complain about the Hongqi. FAW was experiencing huge financial losses. The vehicle had high fuel consumption and poor reliability. There were moments of diplomatic embarrassment when cars broke down after picking up foreign leaders from the airport. The last straw was a serious accident caused by brake failure when the Romanian president was visiting the Great Wall. There were political reasons for Hongqi to fall out of favor, too. Modernization, the market economy, and westernization were the new trends in China. Hongqi was regarded as a symbol of conservative, bureaucratic debris that needed to be reformed. At the time, economic reform was the priority, and after Mao’s death, the glory surrounding the man was deflated.

In 1981, FAW President Rao Bin and the General Manager Li Gang were summoned to Beijing and told of the decision to cease Hongqi production. Rao argued with Premier Zhao Ziyang over the decision in the meeting, saying, “Four people carrying a palanquin is different from 12 people carrying a palanquin. (Palanquins were enclosed sedan chairs in which officials were transported by men holding long poles.) The car is bigger and heavier, so fuel consumption is higher. Fuel consumption of the Hongqi is not much higher and foreign luxury models. The unit production cost is ten times more than a Jiefang truck. The factory is suffering a loss on the Hongqi, but it is for our national leaders, and it is a way for FAW to express our patriotic hearts.” Zhao rudely interrupted him and said, “你别打肿脸充胖子了” (“Don’t slap your face until it’s swollen in an effort to look imposing.”). The harsh Chinese proverb means someone is bragging. Rao then asked, “What about the future of our indigenous saloon cars for leaders?” The one-word reply he received was “importation.” In May 1981, the People’s Daily announced the order to cease production of the Hongqi. It was perceived as a strong signal of economic reform. National leaders started to ride in imported cars. In 1984, China had imported a large number of Toyota Crown models from Japan as official vehicles and Mercedes S-Class for national leaders.

Once Party leaders, the only customers of the Hongqi, decided to abandon it, FAW had only two choices: let the Hongqi disappear or face the mass market. FAW chose the latter. But that required cooperation with major carmakers from around the world. Two years after ceasing production of the Hongqi, the first major automotive international joint venture, Beijing Jeep, was established between American Motors Corporation (AMC) and Beijing Automobile Works (BAW) in Beijing. The Chinese automotive industry had entered a new era.

The Rebuilding of FAW from 1985 to 1995

A strategy of 市场换技术 – “give market access in exchange for technology” – policy emerged in the 1980s. It was proposed by Rao Bin, who was promoted to be Chairman of the China Automotive Company in 1982. He had a clear vision about the future of the Chinese automotive industry:  change the Soviet industry structure and shift resources from heavy industrial/military vehicles to civil passenger cars. Rao wanted the automotive industry to become a pillar of the Chinese economy. As the founder of FAW and SAW, he recognized the technology gap, and encouraged state-owned enterprises to import technology and set up joint ventures with advanced carmakers. He was involved in all the major joint venture negotiations in the 1980s, including the deals for SAIC-VW to manufacture the VW Santana model, Beijing-Jeep-Chrysler to manufacture the Jeep model, and Nanjing Automotive Corporation Group-FIAT to manufacture NAVECO.

Although there was no Hongqi model in production from 1981 to 1996, the development of the Hongqi model never ceased in FAW. Building on the experience of a failed negotiation with Porsche, FAW’s strategy was to develop the model with foreign manufacturers jointly. The goal was to bring advanced foreign technologies to FAW as a foundation to build indigenous models. Lu Fuyuan was the chief negotiator for FAW. In 1982, the company started to hold talks with international carmakers, including Nissan, Ford, Chrysler, and Audi.

Meanwhile, FAW engineers were researching the most popular sedan models of these brands as foundations to build the new Hongqi model. However, the results were counterintuitive and chaotic, as FAW reimagined the Hongqi using reverse engineering methods of the past. In 1982, the model CA750 was patterned on the Nissan 280C, using engines, gearbox, and chassis from the 280C model. In 1984, FAW engineers had installed a Ford 5.8L V8 engine in the CA770 model and redesigned the interior based on Lincoln models. In 1986, FAW engineers developed a new Hongqi model based on the Dodge 600 with Chrysler 488 engines. These three models never went into production because FAW could not reach an agreement with the car companies. Chrysler promised to sell its Dodge 600 production line to FAW in 1987 after FAW bought the Chrysler 488 engine production line. However, the American company increased the price of the Dodge production line, and FAW did not pursue the purchase. FAW was left with a Chrysler engine production line without a means to manufacture a car with it. With no international partners, some engineers in the FAW resumed the effort of redesign the Hongqi model independently. However, their efforts never resulted in production either. These chaotic efforts to build a new Hongqi model reflect the state of FAW of the time. It had lost its totem and was desperately trying to adapt to the new structure of the “profit and efficiency first” world.

FAW managers learned that it was challenging to purchase technologies from international car companies without further collaboration. In 1988, FAW established the FAW-VW with Audi and VW to produce the Audi 100 model through the help of an old comrade of FAW. Jiang Zemin worked at FAW from 1954 to 1962 in the power chain department as an engineer. Shen Yongyan, a close friend and colleague of Jiang, became the Deputy Chairman of FAW in the 1980s.

In 1986, FAW was facing financial difficulties. Geng Shaojie, the president of the company at the time, was discreetly preparing to produce saloon cars. FAW had negotiated with American and German carmakers and was ready for collaboration. Around that time, another Chinese state-owned automaker, SAIC in Shanghai, was working with the VW group to produce the VW Santana. In the summer of 1986, SAIC started to assemble an Audi model using SKD (knock-down kit) technology on the Santana production line. Geng Shaojie heard about this news and urgently ordered Shen Yongyan to go to Shanghai and meet with the then Mayor Jiang Zemin. They planned to negotiate with SAIC to help them meet the target of 65 percent domestic production rate of Santana parts in exchange for SAIC giving up on the production of the Audi model and letting FAW collaborate with Audi. They had the meeting at Jiang’s residence at night. The deputy mayor in charge of the Shanghai automotive industry was summoned by Jiang. Shen explained to Jiang that producing Santanas and Audis were two very different tasks. The factory needed new mold equipment. SAIC could assemble a few units using SKD, but it did not have the capacity to mass-produce Audis. In Germany, Santana and Audi were produced in two factories. FAW had a strong foundation with its rich experience of producing top-class saloon cars, even if the Hongqi production line was closed. If SAIC could leave the Audi production to FAW, FAW could help to manufacture Santana components domestically. This would be beneficial to SAIC and FAW. FAW could get the central government’s support to resume high-class saloon car production in China. Shen was trying to persuade Jiang and to test SAIC’s reaction. Jiang thought for a while and looked around the room and said, “That’s fine.” One year after the meeting, the central government announced FAW and Dongfeng would be the two major manufacturers of saloon cars, the critical task of SAIC was to localize the production of Santana parts. The central government would not approve any new saloon car manufacturers in China.

By the end of 1988, VW informed FAW about the availability of the Westmoreland plant south of Pittsburgh, Pennsylvania. The plant went into operation in April 1978 with an annual production capacity of 300,000 units of VW Golf models. The main plant covered 260,000 square meters and had three production lines, including body welding, painting, and assembly. These production lines and machinery represented advanced technology to FAW. Meanwhile, another Chinese state-owned car factory, SAW Dongfeng, had entered negotiations with other car companies on advanced saloon model production. FAW was in desperate need of securing these production lines from VW. To disguise its desperation, FAW chief negotiator Lu Fuyuan picked just one colleague, Li Guangrong, the deputy chief engineer of foreign relations, to form a modest two-man negotiation team to go to Germany.

Lu Fuyuan was born in a rural farming family. He self-studied English, Japanese, and Russian, as well as radio transmitter technology and computer science as a FAW worker. In his spare time, he translated instruction handbooks for imported machinery. With his excellent language skills and technological knowledge, he discovered faults in some imported machines that failed to perform to the standard in instruction handbooks. He was promoted by the FAW leadership to take charge of negotiations with suppliers and seek compensation. He was later sent by FAW to study computer programming design in Canada. In 1985, Lu was promoted to vice manager of FAW. He was put in charge of managing foreign partnerships, joint venture negotiations, and technology importation. He was constantly traveling between China, Europe, and America, and was called the “Kissinger of FAW,” and represented FAW in all major negotiations with international car companies in the 1980s. His diplomatic skills and persistent qualities were on display in lengthy negotiations, earning him a promotion to the deputy minister of the Ministry of Machine-Building Industry and later to Minister of Commerce in the 1990s.

The negotiations with VW to buy the production lines so they could be dismantled and shipped to China were difficult. Lu was given only $20 million from the central government for the deal, and Volkswagen’s asking price was $39 million. After 21 days of hard negotiations, the parties settled on $25 million. A VW representative told Lu, “We have already dropped our price from $39 million to $25 million. If we sell the factory below that price, it would be shameful for us. But we are still friends, so let’s have dinner before you leave.” During the farewell dinner, everyone relaxed, and Lu overheard two German managers chatting about their concerns about Audi. The company was losing money in Germany, and they were contemplating layoffs. Lu immediately proposed a deal. The Chinese government would import enough Audis to allow the company to break even.  In exchange, VW would give FAW the three production lines at the Westmoreland factory for free. The sides agreed, settling on China importing 14,500 Audi units for three years.

Lu made another clever move. During the celebration dinner after the contract-signing ceremony, he suddenly realized that dismantling the plant would create industrial waste. He convinced the VW representative that the German company should pay to dispose of the waste, and asked the VW representative to sign the terms on a napkin.

Lu then traveled from Germany to the U.S.  He urgently summoned all FAW trainees to guard the Westmoreland factory gate. He told the Americans on-site that, “Everything inside this factory belongs to FAW now.” After dismantling the production lines, VW representatives came to Lu to negotiate the waste charges. Lu showed them the napkin proving that VW had agreed to pay all costs related to the waste.

Lu insisted that VW representatives in Pennsylvania reopen the production lines to prove they still worked. But his real motive was to allow FAW workers to observe how the production lines worked and avoid paying VW hefty training fees. FAW had sent more than 100 Chinese engineers to the U.S. to dismantle the production lines so they could be put it back together in China. In the contract, Lu insisted on adding an unambiguous term that FAW would own “everything, except people” in the plant. When he first visited the factory, 12 cars were parked in the factory parking lot. Lu wanted to keep those cars, but the Americans on-site strongly objected. He showed the VW representatives the contract, and they finally agreed to split the 12 vehicles. The six cars that Lu secured played an important part in transporting equipment and machinery. A few of them were even transported back to FAW with the production line. Until 2009, the factory producing VW Jetta models for FAW was still using the 64 robots purchased from the Westmoreland plant. The three production lines from the Westmoreland plant became the foundation of FAW-VW.

Hongqi in the Joint Venture Era 1995 – 2005

The Hongqi model had finally resumed production in 1996, 10 years after production ceased. The initial design for the new CA7220 model was completed in 1988, based on the Audi 100 and Chrysler 488 engine. It took four years for FAW engineers to fit the Chrysler engine into the Audi 100 body. Engineers spent another four years ramping up manufacturing of Audi 100 components in FAW factories. In 1996, 90 percent of Audi 100 components were being produced domestically, and FAW could finally begin making the Hongqi CA7220. It became the most successful Hongqi model in history. FAW secured 6.6 billion RMB in profit on the model from 1996 to 2006. Its commercial success was partly based on the Hongqi brand value. The CA7220 was the first Hongqi model that regional governments, organizations, state-owned businesses, and even private individuals could buy. The model was seen as a cheaper version of the Audi 100. It was manufactured in the FAW-VW factory with the still strong status of the Hongqi name.

In 1998, the next Hongqi model CA7460 was established for the luxury car market. Developed jointly by FAW and Ford, the model was identical to the Lincoln Town Car. All components were imported from Ford USA. It was assembled in the FAW factory and powered by the Ford 4.6, V8 engine.

The model rolled out in 2000 and was a total market failure. FAW sold fewer than 100 units that year, and the model was taken out of the mass production plan and was made only for special orders. This was just the beginning of chaotic development for the Hongqi.

In 1998, FAW launched an updated model of the CA7220 named Hongqi Mingshi with more advanced features such as ABS, airbags, steering assistance, and central locking. The new CA7220 boasted of a FAW developed engine, the CA4GE, based on the Chrysler 488 engine. In 2004, the Hongqi Century Star model was launched, powered by an Audi 2.4L V6 engine. In 2005, a new Hongqi Mingshi was launched, powered by the Nissan QG18 engine. In 2005, the Hongqi HQ3 rolled out, based on the Toyota Crown Majesta. All of these models failed in the market. Customers were confused. The only connection among these models was the Hongqi badge. The market reputation of the Hongqi brand was tarnished.

From 1983 to 2005, FAW tried to keep the Hongqi afloat, but the company’s strategy had not changed since the 1950s. It was based on seeking direct technology importation from international car companies and reverse engineering existing models. With the failures in model design and inconsistencies in market positioning, the Hongqi brand lost identity and direction. FAW meanwhile was focusing management attention on establishing profitable joint ventures. During the period, FAW went from near bankruptcy to profitability and success, notwithstanding the drag the Hongqi placed on the company.

Hongqi 2005 – Present

Hongqi sales collapsed. In 2004, only 14,525 Hongqi units were sold. By 2008, the number dwindled to less than 500 units. The company kept trying, however. In 2008, FAW discontinued the Century Star and the Mingshi but developed a V12, CA12GV engine model for the Hongqi HQE. The company priced the car at eight million RMB in 2009. The exterior design was identical to the Rolls Royce Phantom, with a price tag even higher. The Chinese state media heavily criticized this staggering price. FAW also brought out a new HQ3 model for select orders only.

The company used the HQE’s engine design to develop V8 and V6 engine models and an automatic gearbox. But no Hongqi model was available for those engines. Hongqi’s myriad problems seemingly proved a famous statement in 2000, by FAW president Zhu Yanfeng about Chinese brands needing to endure loneliness for 20 years. Zhu led FAW to become a profitable, self-sufficient business based on forging joint ventures.

In 2010, Xu Jianyi returned to FAW to succeed Zhu as the president. He said FAW would develop indigenous models at all costs. The Hongqi models entered a new era.

From 2010 to 2015, FAW spent around 32.84 billion RMB on R&D to develop just two FAW models, the Hongqi L5 and H7 – money deployed from profitable joint ventures. In 2011, FAW announced that a development team of 1,600 FAW employees was formed to develop Hongqi models. The new models were aimed at the government car market. The L5 model was priced at 5 million RMB for the private market. The safety features were designed to match the U.S. President’s Cadillac. The car had anti-rocket armor, chemical and biological weapons protection, and bulletproof tires. The V12 engine could enable the car to quickly escape any dangerous scenario. There also were Chinese elements, including a jade door handle. The headrests were fashioned to look like an emperor’s dragon chair. But only 21 units were sold from 2013. The Hongqi H7 was priced much lower: 450,000 RMB. However, with new Party leadership and revised government regulations, fewer than 5,000 units of the H7 were sold in 2015.

The L5 served a diplomatic purpose. In 2013, the car was used to transport French President Francois Hollande during a state visit to China. The deployment of the car symbolically harkened back to the 1960s, when the Hongqi’s first official use to carry the visiting president of France. In 2014, the L5 was the state car for the 22nd APEC meeting.

Hongqi’s more recent fortunes have very much reflected Xi Jinping’s anti-corruption campaigns. In 2012, FAW invested 24 million RMB to build a 600-square meter flagship dealership called the “Red House” in Beijing next to the dealerships of Rolls Royce, Bentley, and Aston Martin. From 2012 to 2014, Hongqi opened luxury dealerships in nine major cities in China. In 2014, Zhang Xiaojun, CEO of the FAW passenger car sales department, told the press that only when Hongqi is successful in the private car market will FAW consider itself a real success. Not only did Hongqi flop in the market, in 2015, Zhang was arrested on corruption charges. From 2013 to 2015, a total of 80 FAW managers were arrested on corruption charges.

In 2017 Xu Liuping, the president of the state-owned China South Industries Group Corporation, a core national-defense group, was named president of FAW. He made Hongqi his top mission of reviving FAW. The result of his effort is yet to be seen.

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