Prospect of Chinese cars in US years away
Cars sold in the US likely would come in at the bottom segment of the market: IHS
DETROIT — Another Chinese automaker is showing vehicles this year at the auto show in Detroit, raising the perennial question about when these companies might sell in the United States.
The answer: Years from now, according to carmakers and industry observers alike.
Chinese manufacturers have announced plans over the past decade to export to the US only to postpone them when faced with passing US safety and emissions tests and building a dealer network. They also must overcome big hurdles in convincing US car buyers that Chinese cars have the quality they demand. Still, Chinese companies remain interested in eventually selling in the prestigious – and potentially profitable – market.
“The fact that they’re showing in Detroit doesn’t really signify that they’re coming soon,” said Michael Robinet, managing director of IHS’s automotive group. “They’re showcasing that they’re in the game, looking to expand beyond the home market.”
Any Chinese-made cars sold in the US likely would come in at the bottom segment of the market for different types of vehicles, Robinet said, where they would compete in the already lively market for used cars. Buyers would need to decide whether it’s better to buy a used car made by General Motors or Toyota, for example, or a new car from a company that just arrived on American shores.
John Humphrey, senior vice-president of global automotive operations at J.D. Power and Associates, said the quality of Chinese-built vehicles has improved, but they still generally lack the fit-and-finish that US car buyers expect. And consumers’ experience with waves of Chinese-made products that they encounter daily at stores would colour their expectations about new cars.
“There’s a general perception of goods coming out of China, being fair or unfair, that they are relatively sub-par,” Humphrey said.
Chinese companies are in their first decade displaying vehicles at the North American International Auto Show. In 2006, a lone Geely Automobile sedan sitting outside the main exhibit halls marked the first time a Chinese automaker showed a car in Detroit.
Last year, the Chinese companies skipped Detroit.
This year, Guangzhou Automobile is showing vehicles including a fuel-efficient small SUV that will be sold in China starting in April and parts of the Middle East, Africa, South America and eastern Europe in late 2015. The company known as GAC said 2017 is a possible year it would like to enter the US market, but there is no concrete timetable.
“Before entering the North America market, we’ll have a full understanding of the culture and consumption features of the North America auto market and release according models,” Wu Song, GAC Group general manager, said in an interview.
In 2007, Chrysler and Chery Automobile, China’s biggest independent brand, announced plans to produce a Chinese-manufactured small car for export to the US as soon as 2010 under Chrysler’s Dodge brand. They ended the venture due to the global financial crisis.
Other companies pegged 2009 as a year where Chinese-made vehicles would be offered for sale in the US, but that year passed without any coming on the market.
Elsewhere, Chery and brands including Great Wall Motors export sedans, minivans and SUVs to Russia, Algeria, Chile and other developing markets. Still, Chinese automakers mostly sell at home, where the China Association of Automobile Manufacturers reports they had 41.2% of the market in 2014. They’re being pressured in China by established global automakers, the same companies that dominate the US market.
“They basically compete on price, and in the past several years have started to upgrade their design,” said Yale Zhang, managing director of Automotive Foresight, a research firm in Shanghai.
Quality has improved but “it’s not there yet to enter mature markets like Western Europe and the US,” Zhang said. In the US, challenges include setting up distribution in an unfamiliar market in which local laws prohibit direct sales to customers, Zhang said.
While Chinese-built vehicles have faced continued obstacles in the US, BYD Auto had success in its plans to put US-built vehicles on the road. BYD, which stands for “Build Your Dreams,” is a major battery maker and last year opened a California factory to produce plug-in electric buses.
Robinet said it’s more difficult now than ever for automakers to make their first steps into a developed market such as the US. It’s expensive to ship from China, he noted, and it took decades for South Korean automakers, for example, to fully establish themselves in the US.
“It’s a massive undertaking and you can’t get it wrong,” said IHS’s Robinet. “You might only have one chance.”
© 2015 The Canadian Press