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PRC carmakers ready for U.S. market

Car firms a few years away from becoming a threat, analysts say

PRC carmakers ready for U.S. market

Amid all the hoopla at next month's Detroit auto show, a simple silver midsize sedan might generate the most buzz.

It's from Geely Motors, which will become the first Chinese automaker in the nearly 100-year history of the auto show to display a made-in-China car intended for sale in the United States.

The silver sedan, called the Geely 7151 CK, will be priced below US$10,000 when it goes on sale in 2008, making it the lowest-priced model in the midsize segment, said John Harmer, vice president and chief operating officer of Geely U.S.A.

Geely, pronounced JEE-lee, is one of several Chinese automakers gearing up to sell vehicles in the United States, providing more competition for General Motors Corp., Ford Motor Co. and the Chrysler Group.

For their part, GM and Ford have been building and selling cars in China for several years, and at a tidy profit.

Great Wall Motor Company Ltd., one of the largest pickup manufacturers in China, had talked to auto show officials about displaying a vehicle at next month's show. But Great Wall has now decided to wait until at least 2007, said Richard Genthe, owner of Dick Genthe Chevrolet in Southgate, Michigan, and the senior co-chairman of the North American International Auto Show.

Car dealers already are lining up to sell Chinese vehicles, hoping to pick out who, among China's more than 100 automakers, will be the next Toyota.

Mel Rapton, who owns a Honda dealership in Sacramento, California, said this week that he has an agreement to sell pickups and SUVs made by a Chinese company called Hebei Zhongxing Automobile at a price of about US$10,000 each.

The 77-year-old Rapton, who began selling Hondas in 1969, admits it might not work out.

"We've got our foot in the door, and if it opens up, we might step inside," he said.

Malcolm Bricklin, who brought the Yugo and Subaru to the United States, has made headlines this year with his plans to sell 250,000 Chinese cars a year beginning in 2007. The vehicles are made by China's Chery Automobile Co.

Consider that Toyota didn't sell that many cars in the United States until 13 years after it entered the U.S. market in 1958. But the 66-year old Bricklin is not shy about setting lofty goals.

"We are in the process of trying to build the best line of cars that's ever been built," he said.

Whether it's Bricklin or somebody else, experts who follow the automotive industry said it's just a matter of time before Chinese cars arrive on U.S. shores.

"I'd probably put them where the Koreans were 10 years ago," Joe Phillippi, principal of AutoTrends Consulting in Short Hills, New Jersey, said of the Chinese car companies. "They're obviously pouring a lot of time and effort and money into quality, reliability, fit and finish. They're probably a few, several, years away from being a threat."

One advantage the Chinese car companies have, as every worker who has lost a job that was outsourced to China well knows, is low labor costs. Geely's average cost for its workers in China is US$3.50 an hour, Harmer said. That compares to hourly labor costs of US$73.73 for GM, which includes wages, health care expenses, pension and other costs.

Many Chinese car companies are backed financially by local governments, giving them a cheap source of money, said John Bonnell, a partner of Automotive Resources Asia.

Chinese automakers have learned a few lessons from their global competitors, Bonnell said.

"The companies take existing technology, and upgrade it with superficial changes. They outsource design and engineering functions to established companies in Europe and the U.S.," he said.

In addition to Chery and Geely, don't be surprised if some established automakers such as Honda Motor Co. or even GM sell Chinese-made vehicles in the United States in the future, experts said.

Geely's Harmer said he is well aware of the long list of automakers that tried and failed in the U.S. market, such as Fiat, Renault, Yugo and Alfa Romeo.

"We intend to come very conservatively," he said, contrasting Geely with Bricklin and Chery. "We are performing the exact opposite approach to the Bricklin approach."

Geely plans to begin selling the sedan and a two-seater sports car in 2008 in Puerto Rico. Geely plans to expand to the U.S. mainland by late 2008 or 2009, but only when the company is sure the vehicles have top quality, Harmer said.

"I don't see us trying to put more than 50,000 in our first year," he said. "Those 50,000 will be watched like a mother hen. We will really have satisfied owners."


Updated : 2021-05-13 09:25 GMT+08:00