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Recently, the Russian satellite news agency revealed that Great Wall will sign a special investment contract with the Russian Ministry of Industry and Trade and plans to invest 4.5 billion yuan in building an automobile factory within the framework of the Special Investment contract (SPIC) to improve the localization of production of key components such as engines, transmissions, electronic components and body control systems. At this point, Great Wall Motor will become the first Chinese car company to sign a special investment contract with Russia.

The 4.5 billion yuan invested this time will be used to expand Great Wall's Tula plant in Russia, which was officially completed in June this year at a cost of 500 million US dollars. It is the first vehicle manufacturing plant with China's own brand covering the four major production processes of stamping, welding, painting and final assembly overseas. At present, the plant has an annual production capacity of 80,000 vehicles and 30 per cent local production of parts. The money invested this time plans to build a production line of internal combustion engines and transmissions at the Tula plant to localize the production of parts such as the power and chassis of cars. In the future, the localization of parts of Great Wall Harvard in Russia will reach 70%.

According to the mid-term results forecast for 2019 issued by Great Wall Motor on July 20, the total operating income of Great Wall Motor in the first half of this year was about 41.38 billion yuan, down 15% from the same period last year, and the net profit was about 1.57 billion yuan, down 58.6% from the same period last year. Net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses was about 1.24 billion yuan, down 65.4 per cent from the same period last year. Profits fell by nearly 60% in the first half of the year, making it difficult for Great Wall to achieve profit growth in the second half of the year.

To make matters worse, Great Wall is now facing the risk of compensation. On June 20, Honda sued Great Wall Motor for infringement of two patents held by Honda over the structure of the rear door and roof decoration of the Harvard H6, demanding compensation of 22.14 million yuan and immediately stopping production and sales of the Harvard H6. As a sales contributor, the Harvard H6 accounts for about 45% of the company's total sales all the year round, and this incident has had a great impact on the Great Wall.

The grim situation of the domestic car market has further strengthened the determination of Great Wall Motor to go abroad and layout the overseas market. In the first half of the year, Russian light vehicle sales totaled 829000, down 2.4% from the same period last year. Although the Russian car market has not performed very well recently, the consumption share of SUV models has increased year by year in recent years, and SUV models accounted for 42% of the total Russian car market sales last year. The demand for SUV models in the Russian market makes Great Wall see hope. As a car company that has been engaged in the SUV field for many years, Great Wall Harvard has the technology and market competitiveness ahead of its domestic counterparts; this time it will invest 4.5 billion yuan in the expansion of its Tula plant, which will further enhance the level of localization of its parts, thus providing greater concessions to the Russian market, which will contribute to the development of Great Wall SUV in Russia.

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