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Auto racing just began for sports investment

By Ecns.cn Monday, 27 Oct 2014 01:15

Sports investment can be an expensive and a risky business, but Wang Chaoyong is determined that his biggest move so far will continue to find a winning formula.

The 49-year-old chairman and chief executive officer of ChinaEquity Group one of China’s earliest independent firms devoted to venture capital and private equity investment-has made two major forays into the sector.

He spent 400 million yuan ($65.2 million) setting up his China Team to take part in the America’s Cup-the world’s leading sailing competition-and he has also spent heavily creating the China Grand Rally, the long-distance endurance driving event now in its second year, which is gaining an increasing international following.

The ChinaEquity founder has lofty ambitions for both of his investments.

“My dream is to see them exert genuine global influence,” he says, adding that he is already planning to extend the route of future China Grand Rallies into Central Asia and Europe.

It was back in 2011 that Zheng Menghui, the general manager of CCTV Sports & Entertainment Co Ltd, and Zhan Guojun, an official at the General Administration of Sports of China, first approached Wang for his help in setting up the rally, which follows the 6,000 km route of the ancient Silk Road-a trade and cultural communication channel first traveled more than 2,000 years ago.

“It immediately interested me because investing in the Chinese sports sector shows great potential and Zheng and Zhan are very experienced in it. We reached an agreement on the route the rally would take because the Silk Road is a great illustration of China’s history and culture,” says Wang.

Last year, ChinaEquity and CCTV Sports & Entertainment took it a stage further and formally set up China Grand Rally Auto Racing Management Co Ltd, and the first China Grand Rally was held.

ChinaEquity invested more than 50 million yuan in the first race and invited Hubert Auriol, a former director of the famous Paris-Dakar rally, to serve as its first race director.

The second Grand Rally started in August this year with participants tackling a route from Beijing to Dunhuang in northwestern China’s Gansu province.

The second rally has attracted more than 1 billion yuan in investment.

“We plan to invest in it for at least 10 years,” says Wang, adding that he views the first three years of his support as simply an incubation period for his investment.

“In a decade, the competition will certainly be a lot more mature and have gained huge global influence on the sport,” he says.

He also expects it to have many more teams taking part than the 56 it has this year, which include some of the biggest names in the Chinese motor industry such as Great Wall Motor Co Ltd, and Zhengzhou Nissan Automobile Co Ltd.

Liu Xianfeng, manager of the well-known Paladin Club and Automobile Sports Section at Zhengzhou Nissan, says that it selects participants to drive its vehicles from its client list, and the cars it enters are always variations of those that can be bought in the domestic market.

The Nissan Paladin is a SUV manufactured by Zhengzhou Nissan and is sold in China only, but it has been active in the much better known Dakar Rally for several years.

“Participating in these races allows us to not only perfect our cars but also to strengthen our brand and the relationship between the company and our clients,” Liu says.

He says that the company’s flagship pickup trucks range in prices from 80,000 yuan to 150,000 yuan, more expensive than the industry average.

“But we will continue to participate in China Grand Rally because it helps us underline the spirit of the brand, and its quality,” Liu says.

Dong Ming, vice-president of Great Wall Motor Co Ltd, says he considers the company’s participation in the Grand Rally as a long-term move, because in this business, “one-off involvements never deliver a profit”.

Great Wall spent 15 million yuan on building two professional sports cars for the race, and invited Christian Lavieille, a top French motorcyle road racer and rally driver to join the team.

Wang says ChinaEquity has developed a sports investment platform that other automotive, tire, oil and outdoor products companies can access for their own business and marketing opportunities.

He says that the company is also talking with domestic oil companies and global automotive manufacturers on possible sponsorship of the Grand Rally.

Xu Jun, team manager of one of the teams taking part in this year’s event, the Yunnan-based East Racing Team, says there are still very few companies in China that offer marketing expertise on sports-related events.

According to a report by Qilu Securities, Chinese sports industry investment was worth 320 billion yuan last year, representing just 0.56 percent of the country’s GDP, against national investment averages of 2 percent globally. The annual per capita consumption on sports in China was only $27, against a world average of $217.

The report predicts that national sports investment will rise to 612 billion yuan by 2017, growing annually by around 17 percent over the next four years.



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