Chrysler announced Thursday that it will sell a small, inexpensive car built by Chinese automaker in South and Central America as early as next year and in the U.S. by 2009. The car is expected to cost about $10,000. But shortly after the Chinese government approved the deal between the two companies, Chery's president contradicted Chrysler and said the car would sell for about $7,000 and go on sale in the U.S. by next year. Such is life in the Chinese auto industry.
There is no question that Chinese automakers are going to be part of the U.S. auto scene. The question is when, and to what degree American consumers will accept cars made in China.
A recent spate of recalls and tainted products from China has dealt a serious setback to the image of goods made in China, according to some analysts. Tainted pet food, fake pharmaceuticals, and substandard tires have all made headlines in the U.S. And China's own General Administration of Quality Supervision just reported this week that in the first half of 2007, 19.1% of products China manufactured for domestic consumption were found to be substandard. "We can't turn the clock back on importing goods from China, but if the negative headlines persist, it will make it tough for every Chinese brand, and that especially goes for cars," says independent marketing consultant Dennis Keene.
Some in the business of trying to import Chinese cars to the U.S. don't disagree. "No question what we are seeing now in the almost weekly headlines is going to make consumer acceptance tougher," says Malcolm Bricklin, founder of Visionary Vehicles. Bricklin, famous for co-founding and importing Yugos to the U.S., has had a deal with Chery to bring the carmaker's vehicles to the U.S. But that deal is in tatters and the two sides are litigating.
Already on the Road in Europe Meantime, Bricklin is looking for a new Chinese partner to supply Chinese-built hybrid vehicles to his company for sale in the U.S. "That seems like the best market opportunity right now," says Bricklin, who calls doing business with the Chinese automakers "a fascinating but sometimes frustrating experience".
Even before Chery has a chance to sell cars through Chrysler, Scottsdale (Ariz.) distributor China Motor is expected to showcase its plans in Detroit this month to sell vehicles built by Chinese automaker Brilliance China Automotive () as early as the fall of 2008. The company has been certifying Brilliance vehicles in suburban Detroit for U.S. safety and emission standards. China Automotive chief David Shelburg says the company has been "flying under the radar" but is about to make its plans clear.
Last May, the company made a presentation to dealers and members of the media in New York, and impressed. "They really had their act together and look readier than anyone from China to start up in America," says Peter DeLorenzo, editor of Autoextremist.com, who attended the conference put on by auto dealer advisory and financing firm BelAir Partners. Brilliance has already launched its cars in Europe.
Korea Is Making Strides in Quality China Automotive is expected to launch with a sedan priced around $20,000. That price could be too high to gain consumer acceptance. TNS Automotive of Marlborough, Mass., recently surveyed 2,500 American consumers on attitudes about Chinese cars and what points should be emphasized in marketing. According to the survey, one approach that stands out as a no-no is emphasizing anything about Chinese heritage or origin. Fifty-four percent said "do not emphasize" Chinese heritage, while 29% said "emphasize only a little."
"Consumers are expecting Chinese cars to be fuel-efficient and inexpensive," said Lincoln Merrihew, senior vice-president at TNS. "If those key expectations are not met, it will be a big problem."
Chrysler will undoubtedly have a leg up in establishing China as a viable source of automotive hardware. It has been in on the design of the car it plans to launch in Latin and North America. It is based on its Hornet concept, which has been shown at auto shows, and will carry the Dodge brand and be serviced by Dodge dealers. In that respect, it will be no different than General Motors sourcing its Chevy Aveo subcompact from its GM-Daewoo unit in South Korea. Relatively few Aveo buyers are even aware it is built in Korea because of the Chevy branding, though the strides that Hyundai Motor and its affiliate Kia have made in quality has elevated the image of "Made in Korea" in recent years for those who actually do know where it's built, Business Week reports.
Sales in North America and Europe are expected to reach 300,000 to 500,000 vehicles in 2019.
The first car exported - based on the Chery A1 compact model - will be sold under the Dodge brand. Chery said it had received more than 10,000 orders for the A1 by the end of May, which made its debut at the Shanghai auto show in April this year.
Chery also plans to set up a joint venture with Quantum LLC, a U.S. subsidiary of Tel Aviv-listed Israel Group, an Israeli company, in its attempt to explore the European and US markets.
Once approved by the Chinese government, the 5.8 billion yuan (US$743.6 million) joint venture will start production in 2009, rolling out 105,000 sedans and 45,000 sport-utility vehicles (SUVs) a year.
Despite its fast growth, Chery is still far from becoming one of the global auto giants that produce an annual average of two million vehicles, said a company executive.
Last year Shanghai Automotive Industry Cor., a partner of General Motors and Volkswagen AG, was China's largest automaker in terms of sales. It sold 1.34 million vehicles, including 915,000 passenger cars, Chinadaily reports.
Prepared by Alexander Timoshik
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