Chinese Cars Coming to Detroit
First China car planned for auto show debut, more to follow.
With nearly 70 new cars, trucks and concepts scheduled for introduction at next month's North American International Auto Show, it takes a pretty significant product to stand out from the crowd. But it's probably fair to say the 7151 CK will draw plenty of attention when the folks at Geely Motors pull off the wraps on the floor of Detroit's Cobo Hall.
The silver, mid-size sedan will be the first Chinese car to share the stage at the annual auto show, which has also served as the backdrop for such brand debuts as the Japanese luxury marques, Lexus and Infiniti. Whether Geely will match their success is far from certain, but there's little doubt the Chinese are readying an export assault on the United States, the world's largest automotive market. Automotive maverick and entrepreneur, Malcolm Bricklin, is preparing a mid-2007 U.S. launch for a line of products he's developing with another Chinese maker, Chery.
While Geely doesn't actually plan to begin selling cars here until 2008, its arrival couldn't come at a worse time - at least for the Big Three. It will debut just weeks before Ford Motor Co. reveals plans to close as many as 10 assembly and parts plants and cut tens of thousands of jobs. General Motors announced similar cuts in November, in response to a steady increase in market share by European, Japanese and South Korean manufacturers.
There's no question the Chinese are building a world-class auto industry. From a base of little more than zero, the country's estimated 200 automakers are expected to turn out 6.4 million passenger cars, vans, buses and trucks in 2006, according to government statistics. That would push production past that of Germany, to make China the world's third-largest automotive producer.
Moving growth abroad
Until recently, most of the country's capacity has been geared to booming domestic demand. And there's been a general consensus that Chinese carmakers weren't up to global quality, engineering and design standards, according to a recent study by IBM and the University of Michigan.
But high double-digit growth rates have dipped a bit, even as more foreign carmakers set up shop in China. And that's encouraging the best of the country's manufacturers to start looking abroad.
General Motors is already shipping to North America a small number of V-6 engines, produced with its partner, Shanghai Automotive. Honda, however, is the only non-Chinese maker specifically focusing on exports, having built a plant in Southern China to produce the small, Fit model for Europe.
It's China's homegrown brands that are particularly interested in finding Western outlets - and generating hard currency without having to partner with U.S., European or Japanese makers.
It appears to be a race to see who will reach American shores first. A year ago, Bricklin and Chery announced plans to start selling the first in a series of products designed for the U.S. by early 2007. That timetable has slipped a bit, Bricklin told TheCarConnection.com.
The partnership between Chery and Bricklin's Visionary Vehicles suffered a series of modest setbacks over the past months. Signing up U.S. retailers proved more difficult than anticipated at the original, $15 million asking price. Bricklin now expects at least 50 to be onboard by the end of 2005 - at an average investment of about $4 million.
Meanwhile, Chery was sued by GM, which feared the Chinese maker's name would be confused with Chevy, the nickname for the Chevrolet brand. Realizing, "that was a gamble we couldn't afford to lose," Bricklin agreed to find an alternative name in the U.S., a search now underway.
"We don't anticipate any more delays," the one-time head of the Yugo venture added, and the launch is now on the calendar in mid- to late-2007.
Working with some high-profile Western partners, including Italian stylists Pininfarina and Ital Design, Chery is developing at least five products for the U.S. market, including a mid-size sedan, a sporty coupe, a crossover and a sport-utility vehicle. A luxury car, along the lines of the BMW 7-Series, is also under consideration, according to Bricklin. But it would likely be priced in the mid-$30,000 range, about half as much as its German competitor.
Geely plans more modest
Geely, meanwhile, intends to launch the 7151 CK for around $10,000, less than half what similar Japanese and Big Three models go for, and even under-pricing economy-based Korean brands, like Kia and Hyundai. Extremely low labor rates, averaging $3.50 or so on hour - barely 5 percent of what U.S. autoworkers earn in wages and benefits - give the Chinese a significant advantage.
Geely plans to start selling the new sedan in the U.S. protectorate of Puerto Rico sometime in 2008, along with a two-seat sports car. It hopes to make the leap to the American mainland by 2009.
Its initial sales goals are a modest 50,000 that first year. Visonary Vehicles and Chery, on the other hand, have laid out a first-year target of 250,000, and Bricklin predicts sales could hit 1 million annually, within as little as five years.
Expect to see still more Chinese brands come to the U.S., especially if these first two ventures are successful. A small SUV manufacturer, Hebei Zhongxing Automobile, is trying to line up U.S. dealers willing to sell its bargain-priced SUV. And the Great Wall Motor Co. is likely to make its own debut at the January 2007 Detroit auto show.
Industry analysts, such as Strategic Vision's Dan Gorrell, stress that cost alone will not guarantee these fledgling imports success. Quality problems doomed Bricklin's Yugo, and nearly killed Hyundai after its initial, price-driven success in the late 1980s. But if the Chinese can deliver a blend of styling, quality, features and, yes, a low price tag, they could carve out a comfortable niche in the American market.
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