Chinese cars you could soon see in the U.S.
As the world focuses on the XXIX Summer Olympic Games in Beijing, Chinese automakers are looking beyond their borders. They aim to sell vehicles in North America, one way or another.
"It's definitely not a matter of 'if,' but 'when,'" says Lonnie Miller, director of industry analysis for the automotive research company R.L. Polk and Co. in Southfield, Mich. Miller expects the first Chinese-built vehicles to go on sale in the United States by 2010 at the earliest. They will most likely be small, fuel efficient and inexpensive, he says.
Most will come from companies unfamiliar to American consumers. Brands like Chery, Changfeng and Great Wall hope to follow in the footsteps of established makes from other Asian countries such as Honda, Hyundai and Toyota, all of which have thriving businesses in North America.
We've compiled a list of Chinese vehicles that seem likely candidates for export to the United States based on information from industry analysts and other sources. See the full list by clicking on the ?slide show? link below.
If the first wave of Chinese cars catches on, analysts expect manufacturers to expand their exported lineups with midsize cars, sport utility vehicles and other models within another two to five years. Miller says Chinese automakers could eventually absorb as much as one-tenth of the United States' new-car market if they're successful.
The design of many Chinese cars might seem derivative, but at least their names are interesting. Imagine driving around in a Great Wall Hover, a midsize SUV.
Chrysler recently signed a memorandum with Great Wall to explore a long-term business relationship. Great Wall is already successful in Eastern Europe and South America and is a leader in producing SUVs for China, says Sachin Rustagi, editor of China Car Forums.
The Brilliance BS4 is another model with an inventive name, though it's the company's name, not the model moniker, that's noteworthy. Brilliance Auto was the first Chinese automaker to set up shop in the United Kingdom, initially offering the midsize BS6 sedan and most recently adding the compact BS4.
The company has expressed interest in selling cars in North America within "about two years."
A growing industrial giant Auto sales in China have skyrocketed over the last decade, swelling 25 percent a year since 2002, according to McKinsey and Company, a New York-based management consulting firm. China overtook Japan in 2006 to become the world's second-largest new-vehicle market, and industry insiders believe it might eventually overtake the United States as the planet's largest car market.
Last year 24 domestic Chinese automakers and 38 import brands sold more than 5.2 million vehicles in that country, according to J.D. Power and Associates in Westlake Village, Calif. The best-sellers are Honda, General Motors, Toyota and Volkswagen.
With a large capital base, low-cost labor and expertise in manufacturing and exporting goods to the Western world, China will eventually become a leading exporter of cars and trucks, industry observers predict.
J.D. Power reports China exported nearly 185,000 passenger vehicles last year ? a 45 percent increase over 2006 ? with the majority of them going to developing markets like Russia, the Ukraine and Venezuela. Analysts suggest Chinese automakers are, in effect, working their way across the globe with U.S. shores being viewed as the ultimate beachhead.
Thus far, efforts of Chinese automakers seeking to enter the American market have unraveled before even getting off the ground.
In 2005, automotive entrepreneur Malcolm Bricklin, the man who helped bring Subaru and Yugo to America, formed Visionary Vehicles to import low-cost cars from China's Chery Automotive. After a few well-publicized auto-show appearances, the partnership dissolved.
Chery decided to cast its fate with Chrysler to help bring its products to the Western Hemisphere. Visionary Vehicles has subsequently filed suit against Chery to recover unspecified monetary damages for what it claims were fraudulent business practices.
Similarly, a company called Chamco, which stands for China America Cooperative Automotive, made a splash at the most recent Los Angeles and Detroit auto shows by displaying two models ? a small SUV and pickup truck ? it planned to import from China's Hebei Zhongxing Automobile Company beginning in 2009 and sell through its own dealer network.
The deal has fallen apart, however. A posting on the company's Web site says: "The Board of Directors has temporarily halted most of Chamco Auto's operations." Inquiries made to the company were not answered.
Several other Chinese automakers are reportedly considering entering the U.S. market, but industry insiders say the first models will likely be imported and sold by third-party automakers under their own nameplates to fill gaps in their lineups. "An established brand can carry a new entrant in terms of a certain familiarity and comfort among consumers in terms of what the vehicles can represent, so it's probably a smart choice," says R.L. Polk's Miller.
East-West alliances Chery Automotive is already set to produce a version of its diminutive A1 for Chrysler, to be sold in Mexico and South America as the Dodge Breeze. There are no plans to bring the Breeze to the United States, says David Elshoff, a Chrysler spokesperson. But he does acknowledge that Chrysler is working with Chinese partners to fill holes in its domestic lineup.
Chrysler currently lacks small, fuel-efficient cars American consumers are turning toward in the midst of high gas prices. A version of the Chery A3 sedan is an example of one model Chrysler could potentially repackage and sell in the United States.
"We are eager to begin exporting small cars from China as soon as possible that will attract new customers in two segments in which our brands are underrepresented: very young buyers and entry-level buyers," Elshoff says. "It's generally understood that the only way to compete in the ultra-price-sensitive subcompact market requires the most low-cost manufacturing base."
As logical as it might seem to leverage Chery Automotive's expertise in building inexpensive small cars, Chrysler is proceeding cautiously. "We will not offer a vehicle until we are 100 percent convinced that it meets global standards and requirements," Elshoff says.
Therein lies one of the biggest challenges.
According to a 2007 J.D. Power Initial Quality Survey, the Chinese auto industry's average problems per hundred vehicles were nearly twice those of cars currently sold in the United States. What's more, many Chinese models have received dismal scores in well-publicized safety tests conducted by independent agencies in Europe and elsewhere.
"The first challenge for Chinese automakers is that they will have to comply with U.S. emissions and safety regulations ? this is a big job," says Tim Dunne, J.D. Power and Associates' director of Asia-Pacific market intelligence. "Besides the regulatory hurdles, the vehicles will have to meet U.S. consumer expectations for quality, dependability and availability of service and parts. On top of that, a Chinese-branded automaker would have to build its own distribution and dealership network in the U.S., which is a monumental undertaking when starting from scratch with an unknown brand."
Chinese automaker Geely Automobile Holdings recently announced plans to build a $500 million assembly plant in Mexico with an eye on producing
300,000 vehicles annually for distribution in North, South and Central America."This seems to make sense due to what will probably be a lower upfront investment, less regulation and traditionally lower labor rates," says Dunne. "This strategy also allows manufacturers to sell in these local markets more easily ? their proximity just makes it easier to operate the business."
There's also the possibility that one or more Chinese companies could just buy their way into the United States. General Motors is currently shopping its underachieving Hummer brand, and rumors have surfaced that Chery, Dongfeng Motors and Shanghai Automotive Industry Corp. have been eyeing Ford's Volvo division, though none have been confirmed.
Acquiring an established brand might be the easiest way for Chinese companies to get a foothold with upscale U.S. car buyers, because in that segment perception trumps reality, experts say, and even five or 10 years down the road, the idea of a Chinese-branded luxury car made in China might be too tough of a sell with those shoppers.
"The public will buy most brands that are sold to and managed by other companies no matter where they're located, so long as they maintain the same 'shape and feel' to the product," R.L. Polk's Miller says. "The question here is whether the consumer will look under the hood and see a lot of Chinese script on the engine, or are they going to be able to tell that it's still a Volvo?"
Click on the ?slide show? link above to see the Chinese vehicles likely to hit the United States first.