Veteran auto entrepreneur Malcolm Bricklin’s deal with China’s Chery Automotive stalled just briefly, Bricklin insists for lack of money. And cars from rival automaker Geely flunked trial runs of U.S. emissions and side-crash tests, so engineers must redesign the cars and engines.
Conventional wisdom is that cheap Chinese cars are inevitable in the USA. But hiccups at Chery (CHAIR-ee) and Geely (JEE-lee) show it won’t be a snap.
"Yes, they will be here. The question is who will be first," said George Peterson, head of consultant AutoPacific. He says Bricklin will be lucky to be selling cars by mid-2008, nearly a year later than planned. Geely "looks as if it is less prepared" and will take longer.
"It took the Japanese 20 years to understand this market and build appropriate cars," Peterson said.
Bricklin had been trying to raise $200 million, $2 million at a time from each dealer who signed up. So far, he says he has only 37 dealers. "We thought we were going to get the money sooner," he said by phone from China last week. He was there reassuring Chery that he now has $225 million from Atlantic-Pacific Capital. That company wouldn’t comment.
"The joint venture (with Bricklin) is not settled yet," Chery spokesman Wang Wei said Friday. "It takes time." Just 30 days or so of paperwork and other formalities, Bricklin says. Then Chery can begin developing vehicles designed by Bricklin’s team specifically for the U.S. Chery wanted to see Bricklin’s cash first.
He hopes to begin selling vehicles in the U.S. by late next year. Unrealistic, says Michael Dunne, veteran of China’s auto industry and now president of China-based consultant Automotive Resources Asia: "We are talking 2008 or 2009; 2007 is very unlikely."
Geely’s problems could be more damaging. "We have a major problem with the current engine," said John Harmer, COO of Geely-USA. It won’t pass U.S. anti-pollution rules and could be difficult to redesign. Buying engines from another maker would boost costs and probably prevent Geely from hitting its goal of a $10,000 U.S. selling price.
The car also failed a side-impact test designed to duplicate the government’s. Geely engineers are traveling to the U.S. in the next few weeks to review the safety tests so they can redo the car, Harmer said.
Harmer forecasts a late 2008 U.S. on-sale date, initially in only a few markets, probably near ports.
Chinese automakers "will face a tremendous amount of consumer resistance, because of their newness, until they prove they can be trusted," said Dan Gorrell, vice president at Strategic Vision research and consulting. In addition to low prices, they’ll probably need long warranties and the kind of kid-glove showroom treatment typical of luxury dealerships, he said.