Undeterred by the fact that they have no product to sell in the U.S., five indigenous Chinese automakers are crossing seas to make a sales pitch at this month’s North American International Auto Show (NAIAS) in Detroit. Whether any long-term good comes of it remains to be seen.
“It is about being in Detroit to show the world that they are coming and want to be taken seriously,” said industry analyst Michael Robinet of CSM International in explaining the thinking of Chinese exhibitors. “NAIAS is an international auto show. Media from virtually every major vehicle sales destination will be in attendance.”
Despite whatever image of seriousness the Chinese companies manage to project at the NAIAS, it will be “another three to four years before any real volume from a Chinese OEM finds its way to the U.S.,” Robinet said.
One of the two Chinese automakers that already have exhibited at the NAIAS, Geely, promised during its 2006 auto show press conference that it would be exporting high-quality cars to the U.S. in 2008. But according to published reports, the company has pushed back indefinitely its aggressive timetable for U.S. entry. Changfeng exhibited at the NAIAS in January 2007 with a promise of U.S. product within two years. Like Geely, within a year it was backpedaling on its pledge.
The other three Chinese NAIAS exhibitors are first-timers: BYD Auto, Chamco Auto, and Li Shi Guang Ming Auto Design.
Several high hurdles greet any Chinese automaker attempting to penetrate the U.S. market, according to Robinet. Distribution is one of them. Based on their experiences setting up systems in the U.S., “the Japanese and Korean OEMs will tell you it is a substantial challenge,” said Robinet. “Given the mobility in this country, one needs the ability to service a vehicle from coast to coast to have any success. This is why many of the Chinese OEMs are looking to used-vehicle chains such as Penske, AutoNation, or even Wal-Mart or Costco. An instant sales and service network is required for legitimacy and longer-term volume.”
Another hurdle is meeting safety and emissions standards, which are ever stiffening. “This is why Chery and Geely courted western suppliers [that possess] the technology to meet the regulations,” said Robinet.
There are a number of other hurdles, but “in the end, Chinese vehicles will have to sell the same way the early Korean offerings did: same or more content, with little perceptible quality penalty for less money out the showroom door,” Robinet said. “The niche they would fill is a content/value niche—not performance, not interesting styling. It comes down to the final package and what the cost is."