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Chinese brands cautiously prepare for U.S. market

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  • DETROIT, Jan 15, 2008; Chang-Ran Kim, writing for Reuters reported that Chinese automakers appeared to take one step closer to entering the coveted U.S. market as a record five companies exhibited at the North American International Auto Show in Detroit this week.

    "I take the Chinese very, very seriously," Chrysler LLC Vice Chairman Jim Press, a former Toyota Motor Corp executive, told reporters at the show.

    Press said it took the Japanese more than 25 years to crack the U.S. market, while Korean automakers had accomplished as much in half the time.

    "It will take the Chinese about half the time it took the Koreans," he said. "You have to take all of them seriously."

    A U.S.-China venture also said it would begin importing what would be the first Chinese-made cars some time this year.

    Auto industry watchers have been anxiously awaiting hints of when the Chinese would be ready to enter the United States, with domestic brands General Motors Corp, Ford Motor Co and Chrysler LLC already struggling to fend off competition from the Japanese, Koreans and Europeans.

    Pure Chinese carmakers that are not tied to foreign joint ventures now make up about a third of their fast-growing home market, and many have their sights set on overseas markets to raise their game.

    "I have absolutely no doubt that Chinese makers will be in North America in large numbers in the next few years," said Glenn Mercer, an independent consultant at GM Automotive LLC. Continued...

    He said Chinese carmakers were interested in following the successful auto export models established by Japanese and Korean manufacturers, partly to improve their standing with consumers around the world as well as at home.

    "'Sold in America' validates the brand back at home. The idea is, if they can make it here, they can make it anywhere," Mercer said.

    Industry experts and Chinese automakers themselves acknowledge the high hurdles that remain.

    With a huge used-car market in place and the low-cost strategy already pursued successfully by Korean carmakers such as Kia Motors Corp , the Chinese need to offer more than a cheap sticker price, they said.

    They also face an unprecedented level of scrutiny on quality after extensive media coverage of lead-laced toys and poisonous pet food products put many consumers off of China-made goods.

    "We're still infants, elementary school students in the industry," Frank Zhao, vice president of Geely Holding Group, told an industry seminar on Tuesday at the show.


    Still, U.S. dealer venture Chamco Auto is looking to begin importing cars built by little-known Zhongxing Automobile some time this year, in what will likely be the first entry by a Chinese-made car.

    "The challenge will be, from the consumers' point of view, can they trust their families to be safe in Chinese cars," Chamco Auto Chief Executive William Pollack said.

    Crafting a distinct brand identity was also crucial in creating a niche for themselves here, he added.

    Sticker prices would start at a base of about $13,500, Chamco said in a standout.

    Geely's Zhao said that in addition to the prerequisite of being a low-cost provider of quality automobiles, Chinese makers needed to master innovative technology to succeed long term in the United States.

    "That's why R&D is the number one (priority). We have a great future, but lots of homework," he said.

    In a bid to demonstrate its engineering credentials, Geely Chairman Li Shufu a day earlier focused on communicating the company's efforts in leading the industry on road safety.

    Geely, China's biggest privately run automaker, produced a video of a proprietary stability system designed to keep vehicles from leaving the road or rolling over in the event of a tire blowout.

    "Many people don't believe Chinese companies are doing innovative work," Li said.

    Li did not give a target date for entering the U.S. market, but told Reuters on Tuesday that if everything went right, he envisaged an entry in about five years.

    His counterpart at Changfeng Group Corp, another Chinese upstart exhibiting at the Detroit auto show, was more bold. "We are very ready to enter this international competition," Chairman Li Jianxin said.

    Changfeng is displaying its SUVs and cars at the show and plans to begin U.S. sales in 2009. Li said the group could also consider a U.S. assembly site if those plans move forward.

    "Building an assembly line is one of the options," Li said, adding the company would have more to say at next year's show.

    Globally, Changfeng is aiming to increase its vehicle output capacity by tenfold to 300,000 units by 2010, bringing out 13 new SUVs, minivans and sedans over the next three years.

    Li said: "300,000 is still a conservative figure for us."

    Changfeng, which has a technology tie-up with Japan's Mitsubishi Motors Corp (7211.T: Quote, Profile, Research), is showing five vehicles at the show this year, including the Liebao CS7 SUV.

    In addition to Geely, Zhongxing and Changfeng, exhibiting at the show are BYD Auto Co, an offshoot of a battery maker, and Li Shi Guang Ming Auto Design Co, an design house.

    Additional reporting for Reuters by John Crawley and Kevin Krolicki, Editing by Peter Bohan.