Golden Dragon Bus in Russia, the First Year of the Pioneer(2)

However, due to the distributor's aggressive sales policy of using the capital to invest in other industries, the funding strand got broken, and in 2008, its company went into bankruptcy. This led to serious financial problems for Golden Dragon. Besides, the after-sales service in Russia also became a major problem, as the customers can not find the original distributor for bus repair and maintenance. The market dropped to the bottom as customers got so disappointed with Golden Dragon.

"When picking up the Russian market in 2009, we were not starting from 0 but the negative. We had a lot of customers, but most of them were in the impression that the after-sales service of this brand was not good. Besides, we no longer had the certification as the original distributor went bankrupt. The money spent on the certification was also gone." Ju Jiang said. Drawing from this lesson, Golden Dragon became very serious in the choice of new distributors and decided to bear all the costs of the new certification. However, to further develop the Russian market, such kind of cooperation was still going to be a huge risk for Golden Dragon. "With the distributor growing bigger, holding the certification, things could become tricky when we have different interest."


To change the situation:Russia's "subsidiary model"


 Under this situation, Golden Dragon set up its overseas subsidiary in Russia, which was the first overseas subsidiary of the China's bus industry. "The concept of subsidiary is different from branch and agency. It is a local registered company in Russia with an independent legal person. Golden Dragon has 100% of its controlling stake, which enables us to apply for the certification, just like the distributor, only with a independent legal person, meaning we could control the risks. All the certifications can be placed under the name of the company, which lays solid foundation for the long-term development in this market."

The benefits of establishing a subsidiary were soon shown out.

In 2013, Russia introduced non-tariff barriers on imported buses not manufactured by the Russia, Belarus and Kazakhstan alliance, raising the price of imported buses by about 10%. With the rapid development of Russia’s local bus manufacturing companies, China's buses lost its competitiveness in Russia. The bus export to Russia was almost cut off.

"With this policy coming out, the bus export of other Chinese companies to Russia was almost stagnant. But we had already certified many other models like tourist bus and long-distance bus, which enabled us to survive the impact. If there were no establishment of the subsidiary, the Russian market would no longer exist, but the reality is that our sales in Russia at least doubled this year. " Mr. Bao said.

China's bus industry will no doubt expand into the overseas market in the future. Apparently, Golden Dragon has already took the first step.