China seeks inroads into U.S. car market
Amid all the futuristic vehicles, “green cars” and much-hyped “crossovers” being unveiled this week at the Detroit auto show, one of the biggest game changers coming to the American automotive market may be a simple price sticker.
How’s this for innovation: $14,000 for a fully loaded, mid-size sport utility vehicle with a leather interior.
The catch: It’s made in China.
Four Chinese automakers and an American importer of Chinese cars showed off their wares here Monday, with one promising to bring vehicles -- including the SUV -- to the U.S. as soon as the end of the year. It was a torrent of activity from an industry that made its debut at the Michigan big boys’ party only two years ago.
Their plans to sell cars in the world’s largest auto market are nothing if not ambitious, considering the mountain of regulatory and marketing challenges, not to mention a recent history of postponed and canceled attempts to come stateside. And then there’s the skepticism of U.S. consumers, who have endured recalls of pet food containing Chinese-made ingredients, hazardous toys and other tainted products.
Still, it’s hard to ignore the ability of these manufacturers to supply an exploding Chinese market. (Nearly 8.8 million vehicles were sold in China last year, a 22% rise that put its market at more than half the size of that in the U.S.) And thanks to joint operating agreements required of U.S. and European companies selling cars in China, Chinese manufacturers have gained exposure to some of the latest Western technology, which could be a significant leg up.
“There are a number of very aggressive car companies in China,” said John Parker, who as Ford Motor Co.'s vice president overseeing its Asia Pacific and African operations works closely with a Chinese carmaker through a joint operating agreement. “Their cars are progressively getting better. I think it will be a very significant industry in terms of size and scale.”
Probably coming to U.S. roads soonest are cars from China America Cooperative Automotive Inc., a U.S. company with an exclusive contract to sell 600,000 pickups and SUVs, including the $14,000 model, over five years. Chamco Chairman William Pollack says the cars will go on sale at the end of this year or early 2009 in nine states, including California.
The vehicles are made by Heibei Zhang Xing, or ZX Auto, and Chamco says they are going through the engineering changes required to pass U.S. safety and emissions regulations.
“We know this car will pass the most rigorous testing,” Pollack said. “We have quality inspectors in the factories. These will be in showrooms soon.”
Several other Chinese firms say they aren’t far behind. Hunan Changfeng Motor Co. says it will sell SUVs in the U.S. next year. Chrysler signed a deal with Chinese company Chery Automobile Co. last month to make economy cars that it would badge as Dodges and sell in the U.S. starting in 2009.
BYD Co., a Shenzhen-based automaker that makes cars that look suspiciously like Mercedes-Benzes and says its name means “Build Your Dreams,” says it could market its sedans, including a plug-in hybrid, in the U.S. in three to five years.
Meanwhile, China’s largest automaker, Geely Group, said this week that it planned to build a production plant in Mexico, just two months after another Chinese company, China FAW Group Corp., made a similar announcement. Neither said it would use Mexico as a beachhead to gain entry into the U.S. market, but many observers believe that it’s just a matter of time.
Like most products from China, the central marketing approach will be affordability. It’s the same road taken by South Korean carmakers Hyundai and Kia in the last two decades and, further back, Japan’s Toyota and Honda. Yet with models that have retracting hardtops, anti-lock brakes and heated seats, the Chinese say they’re not hawking econo-boxes, despite prices that almost never break $20,000.
For companies established in the U.S., the threat of price competition is worrisome. Industry analysts point to Hyundai’s impending launch of a low-priced luxury sedan as a response to the Chinese threat. The South Korean carmaker, they say, is essentially trying to move up a category to get out of the bargain-shopper realm.
“Automakers are very much worried about Chinese automakers,” said Aaron Bragman, an industry analyst at Global Insight.
He contends, though, that the immediate threat is not in the U.S. but in China itself, which the world’s carmakers have rushed into in recent years. General Motors Corp., for example, sells more Buicks in China than in the U.S. “How long can U.S. automakers keep a position of prominence there?” Bragman asked.
Moreover, the manufacturing capabilities that Chinese carmakers develop at home could easily be exported to international markets with fewer regulatory hurdles than the United States and shoppers who have less to spend. Chinese cars are already sold in Africa and Latin America, among other places.
Even Toyota President Katsuaki Watanabe is paying attention, with plans to develop low-priced cars for China and other developing countries. “Low-cost engineering technologies are very important,” he said Monday.
Still, the U.S. is perhaps the world’s most sophisticated, and saturated, car marketplace, and beyond strict regulations, marketing is a mammoth challenge. If the Chinese PR on display at the Detroit show was any indication, Middle Kingdom automakers have a long way to go.
Changfeng Chairman Li Jianxin, who doesn’t speak English, insisted on reading a speech in phonetically rendered English -- a painful experience for reporters covering the event. An accompanying news release bore last-minute redactions made with black marker -- apparently in an effort to conceal the fact that one Changfeng model relies heavily on Mitsubishi Motors technology. But journalists could easily read the text beneath the black ink. Oops.
Executives at Geely seemed unprepared to answer the most obvious question: When will their cars reach American shores? And they hemmed and hawed over a presentation spotlighting their brake technology, which the company billed as “a great gift for mankind given by the Geely Group in automotive safety.”
Minutes later, BYD trumpeted its humdrum F3R model, available in a trim level called “Fashion,” as a “sporty look for a more spirited uptown experience,” as well as a plug-in hybrid it claims -- to the disbelief of those present -- can go 60 miles on battery power. That would be 50% farther than the hotly anticipated Chevy Volt, which isn’t expected to go on sale until at least 2010 and whose battery technology remains a work in progress, according to GM executives.
But perhaps the most entertaining offerings were three electric vehicles made by the Li Shi Guang Ming Automobile Design Co. They looked like oversize bath toys, painted bright yellow and bearing nameplates such as “The Book of Songs,” “A Piece of Cloud” and the amphibious “Detroit Fish.” Two of the models could go on sale in China this year, the company says. Depending on the type of battery, the cost is $5,200 to $9,200.
“Chinese manufacturers are good at production,” Chamco’s Pollack said. “But their expertise is clearly not in marketing.”
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Chinese car firms at the auto show
* Founded: 1986
* Background: Geely started as a manufacturer of refrigerator evaporator parts in 1986. It began making motorcycles in 1994 and cars in 1997.
* Founded: 1995
* Background: BYD is the world’s second-largest maker of rechargeable batteries. It started making cars in 2003.
Hunan Changfeng Motor Co.
* Founded: 1996
* Background: Begun as a joint venture between Hunan Changfeng Group and Japan’s Mitsubishi Motors Corp., the company specializes in sport utility vehicles.
Li Shi Guang Ming Automobile Design Co.
* Founded: 2002
* Background: Li Shi is making tiny, bubble-shaped electric vehicles.
* Founded: 2006
* Background: China America Cooperative Automotive Inc. is a New Jersey-based firm that plans to import vehicles made by Heibei Zhang Xing, or ZX Auto, to the United States.
Source: Times research
Detroit auto show
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