This story first appeared in the May issue of AutoTalk – CLICK HERE to download the magazine FREE
When former Sime Darby New Zealand distribution boss Grant Smith was let go from his position as part of a reshuffle in 2015, he was slightly disillusioned with the trade and looked for new opportunities in the not-for-profit sector.
But the lure of the business was too strong and, after a few months, he got a chance that provided both an adventure and an interesting way to continue his 38-year automotive career.
Smith, who had previously led the Porsche brand in New Zealand, was given the opportunity to move to Hong Kong to lead the brand there and in Macau for Jebsen Holdings, which has been handling the brand for 60 years.
And the position goes beyond leading a niche dealership in a territory where 50kmh speed limits are the norm. Smith acts as the de facto distributor in a market where Porsche is the eighth most popular brand, outselling even Mazda.
The brand sold an impressive 1547 cars in 2015 before an overall market slump in 2016 that saw it drop to 1285 units but still ahead of Lexus on 924 and Mazda on 908.
Jebsen also holds Porsche franchises in China; it was the first to sell the brand there until the factory took over. Last year the brand ranked Smith’s operation number two in the giant country.
“Which is a fantastic improvement because when I started we were 46th and now we’ve improved to number two, so we’re number two out of 92. That’s, I think, a pretty good achievement for us.”
Under Smith’s control are two showrooms in Hong Kong, one in Kowloon and three service centres, including a massive new 3065 square meter facility that also handles panel and paint. The brand employs 173 staff in Hong Kong and another 23 in Macau.
So what is different about selling cars in Hong Kong over Australia? Firstly, showrooms sit on some of the most expensive real estate in the world, putting space at a premium.
The city centre facility we met Smith at is on a strip with other premium brands, tucked into the ground floors of commercial and residential buildings. Ceilings are low, making cars difficult to light, and they lack the airy feeling of modern western dealerships.
It is also more difficult to make cars available for test drives, with a small selection kept in an adjacent parking building. Not that buyers regularly do.
“So people, when they come in here, are very well educated, very well studied. They know exactly what they want,” Smith says.
“In Hong Kong, they are happy to come in and write you a cheque for the deposit. No test drive here required.”
There are other factors to take into account when dealing with local customers.
“People here are very, very focused on wealth and luck. There are lucky numbers and lucky days for delivery so we facilitate that.”
Another difference in being in a city of 7.2 million people is the number of potential customers. At one point during AutoTalk’s visit late on a Sunday afternoon, ten customers were in the showroom.
“Back home we would never see this kind of traffic,” Smith says.
Hong Kong has a used car market but it is a fraction of the new car business, with people preferring to pass the vehicle through their families when they move on to a new one.
Event marketing
Events are a huge part of marketing premium cars in Hong Kong. Since Smith’s arrival, there have been some massive events around the 60th anniversary of the brand in Hong Kong, alongside customer-focused new vehicle launches.
“It’s a very different level when it comes to events and stuff, the ones we do here are world class, like unbelievable,” he says.
One of his first events involved hiring the terminal of the old Kai Tak Hong Kong airport and creating a Porsche time tunnel. Race drivers and international management attended.
“It was unbelievable, just to celebrate the brand’s success here. They take it very seriously and invest a massive amount in branding.”
Other events include VIP cocktail functions, classic vehicle meets and owner tours. Customers are also transported to tracks in mainland China for driving events.
Taxing issue
Taxes are a significant factor in the Hong Kong car market. Getting a car on the road is expensive, with a first registration tax of nearly 100%.
As an example, a 911 Carrera 4S has a base price of AU$204,000, but by the time tax is added the overall price rises to AUS$403,000. And the tax applies to all the extras – including service contracts and extended warranties – sold on the car in the first six months.
That means only the rich can afford vehicles and it leads to an unusual model mix. Toyota leads the market because it dominates taxis and working vehicles, but second in 2016 was Mercedes-Benz followed by BMW, Honda and then, interestingly, Tesla.
The performance of Tesla was largely down to the Hong Kong Government removing the sales tax for electric vehicles.
That rule ended in March and electric cars are now subject to the same high tax with a comparatively small AU$28,000 government incentive. High Tesla sales for the first quarter are likely to slump now.
Smith is disappointed the tax break is gone – as it would have made the brand’s Mission-E electric model massively appealing when it launches in 2019.
“If it had stayed the same we could have launched the Mission E for under HK$1 million dollars (AU$167,000),” Smith says.
“That was a huge advantage for us, but that’s now changed.”
But he believes the model will still do well.
“The people of Hong Kong love electric cars.
“Charging stations are everywhere in Hong Kong – they probably have the best charging infrastructure in the world. Every mall you go to, every carpark would have ten Tesla charging stations.
“That will be part of our strategy as well when we launch Mission E in Hong Kong, to put Porsche charging stations in at major locations to support our cars.”
Hong Kong has the equivalent of the Federal Chamber of Automotive Industries – the Hong Kong Motor Trade Association – to lobby its government on issues like that, but Smith says a significant amount of work has been done recently by a breakaway group of European distributors working together.
Leasing learning curve
The finance and insurance market in Hong Kong is very healthy and interest rates are low.
Smith says around 30% of cars sold by the dealership are financed and his sales team – all licensed financial advisers – handle the insurance needs of 90% of the cars they sell.
But when he first arrived Smith noticed no one offered leases. So he put together a lease package on a Macan, offering it at HK$13,888 a month – a lucky number.
“We promoted it like crazy, the salespeople worked hard on it, and guess how many we did? Zero.”
“But it was amazing for talkability and it brought people into the dealership. They chose other products because I learned people from Eastern cultures like to own the car at the end of the period. They don’t want to walk away.”
Instead, Smith is working on more creative ways of financing vehicles.
“There’s nothing new in the car industry; there’s probably nothing new in the finance industry.
“It’s how we can repackage that, how we can make it more interesting.”
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