For every Chinese manufacturing start-up that makes it big, there are thousands of unsung firms stranded in mediocrity. It’s hard to say what makes one company succeed where so many others have foundered – but luck and good timing undoubtedly play a part.
That was certainly the case for East Arrow – probably the fastest-growing car modification business you’ve never heard of.
Since Guangdong East Arrow Automotive Products was established in 1994, it has grown from a tiny furniture maker into a major exporter of exterior car parts (think roof racks, grille guards and mud flaps).
Even East Arrow boss, Ma Yongtao, admitted to CBN Weekly his success “is partly down to luck”.
He made his first foray into car parts in the early 1990s, after being asked to repair the dented bumper of a smuggled Toyota Land Cruiser. (In those days getting a foreign-made car often meant buying one that had been imported illegally – and spare parts were hard to come by).
From that fortuitous encounter Ma established a decent-sized business serving the needs of the smuggled-in car market. But that all came to a halt in 1997 when authorities stamped out most of the car smuggling.
If East Arrow was going to continue making car parts it would have to look overseas for customers – starting virtually from scratch once again.
Ma tried advertising online for business but orders were small to begin with. His break came when he won a contract from Honda in 2000. That began his education in the exacting quality standards demanded by major car firms. “That first [Honda] product had a defect rate of 80%,” according to CBN, “and in the first year East Arrow lost several hundred thousand yuan.”
East Arrow had the resources to take the losses while it learnt the trade. Ma was also savvy enough to realise he couldn’t rely on a single customer – or his existing business model – to survive in the long run.
“OEM alone has no future,” Ma told the magazine, “as Guangdong’s manufacturing costs can’t compete with the rest of the country.”
So East Arrow also set to work creating its own brand: Winbo.
Progress was slow at first. The company first took a table at the Specialty Equipment Market Association’s US trade show in 2000 (more of a Budweiser than Bordeaux evening, by the sound of it) but it wasn’t until 2004 that it got its big break.
Then it was approached by a struggling US wholesaler, and started a collaboration that would define the company. The customer came up with innovative ideas for parts like roof racks, and East Arrow worked out how to make them cheap.
Market share in the US then started to grow at an astounding pace – to 40% in certain car modification product lines within a couple of years.
Ma credits the quality control lessons learned from Honda, allowing it to price 15% higher than rival Chinese firms.
Ma says he’s also had to learn to combine outsourcing “low value-added processes” while keeping essential work in-house. (Rustproofing was one area where outside quality was unreliable, and so has remained a core competency).
Fortune was with Ma again when the financial crisis hit in 2008. Some of his customers were struggling to pay him for the orders he’d filled. Should he file export insurance claims and risk bankrupting his customers, or take a chance that they’d eventually pay up?
Ma decided to trust his luck once again and recovered the sums owed over time, maintaining a full customer roster for when the market finally began to recover the following year.
With China now the world’s largest automobile market, Ma’s current hope is that the American love of modifying cars will spread to his home country.
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