Chinese to Enter U.S. Auto Market - Tire Review Magazine

Chinese to Enter U.S. Auto Market

(Akron/Tire Review – Sam Jose Mercury News) With one humble car, a modest sedan called the Geely CK 1.5, parked Tuesday in the lobby of the North American International Auto Show, a Chinese automaker announced it's coming to the U.S.

And, it has other automakers concerned, not only the now-struggling U.S. manufacturers but also those from Japan and South Korea.

"Long term, you’d be crazy not to be looking at what could China do, given what others have done," General Motors Chairman Richard Wagoner told reporters Tuesday.

"Short term, it’s not an issue," he said. "The product won’t be competitive."

Executives with Geely Automotive Holding, based in Hangzhou, China, don’t necessarily disagree. Chairman Shufu Li, the son of a peasant farmer, said it will take at least 18 months to get the company’s cars up to U.S. safety and emission standards.

But Li expressed confidence that American car buyers will give his company a chance.

"Coming to Detroit has always been our dream," Li said through an interpreter. "It’s like a hometown for the world’s automobile industry." Li’s company made refrigerators, stoves, bicycles and motor scooters before starting to make cars.

John Harmer, vice president and COO for Geely USA, said that by the end of 2007, Geely (pronounced JEE-lee) expects to have its cars certified and have a network of dealers. It first intends to sell cars in Puerto Rico so it can closely monitor them, including doing monthly checks. The first sale in the 50 states would come in early 2008.

"Our objective is to make certain we have maximum quality in an automobile that the American consumer can purchase for $10,000," said Harmer, a former California lieutenant governor under Ronald Reagan and an attorney who represents foreign companies in U.S. regulatory matters.

The CK on display will be updated before it heads to the U.S., but it won’t get such niceties as navigation systems and high-end stereos. "We’re talking about a basic, fundamental automobile," Harmer said.

A second Geely, a two-door sporty coupe known as the Beauty Leopard in China, would arrive next with a $14,000 sticker price.

Geely made 140,000 vehicles in 2005. Li said he doesn’t know how many cars his company can sell in the U.S.

Geely is not the only Chinese automaker with plans for U.S. sales. Entrepreneur Malcolm Bricklin, through his Visionary Vehicles, is working with Chery Automotive to bring vehicles to this country.

None of the Chery products are on display in Detroit this week, but Bricklin held court at Detroit’s Cobo Center. Bricklin is best known for bringing Subaru and then Yugo to the U.S. The Yugo became fodder for late-night TV jokes, thanks to its poor quality and unusual shape.

In talking about his plans, Bricklin said he’s working with AVL, an Austrian engine maker, and Bertone and Pininfarina, two well-regarded Italian design houses. He’s looking for dealers to invest in his idea – it’s unclear how many have so far – but he has received some financial support from banks.

He plans to export not cheap cars, starting in 2007 through 100 to 125 dealers, but luxury cars that are priced much less than the competition – perhaps about $20,000 for cars that are comparable to $35,000 or $40,000 cars from other automakers.

He talks of bringing five models to the U.S. The interiors would be elegant. "Instead of a Yugo, it’ll look and feel like a Bentley," he said.

While confident in his effort ("I’ve been through this so many times"), Bricklin lists politics, trade pressures and shipping as potential hurdles. "Is China going to be here? Absolutely. Are we bringing in Chery? Definitely. Am I going to sell a million cars in the fourth year? Absolutely not. I don’t think I could handle the logistics."

Automakers like Geely and Chery also face another hurdle: "Made in China" might not be a phrase that resonates positively with U.S. consumers.

"Very candidly, products from China don’t enjoy the best reputation," Harmer said. "That’s one of our major problems."

But analysts quickly mention that "Made in Japan" used to be considered bad by U.S. consumers, but now Japanese vehicles have a good reputation and that cars from South Korea have shown significant quality gains in recent years.

China’s automotive market is booming – it now is a 5-million-vehicle-a-year market – and many of the big automakers sell vehicles there, usually in conjunction with local companies. And, while no Chinese-made auto is sold in the U.S., some parts, including the engine in the Chevrolet Equinox sport-utility, are manufactured in China.

"By the end of the decade, China will be a force to be reckoned with," said Tom LaSorda, CEO of the DaimlerChrysler’s Chrysler Group.

Kevin Smith, editor of Inside Line, an online auto magazine on edmunds.com, said U.S. automakers should be worried about the Chinese car makers. "They’d better be," he said. "The Japanese better be worried about the Chinese. What we’re seeing is that automotive technology is a commodity that’s available on the open market. It’s a small world now."

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