IE 11 is not supported. For an optimal experience visit our site on another browser.

Chinese automakers see U.S. as a challenge

In a year where recalls fueled distrust about the "Made in China" label, Chinese automakers still are showing increasing interest in cracking the lucrative U.S. market.
Auto Show Chinese Challenges
After a one-year hiatus from the Detroit auto show, China's Geely is back with eight vehicles, and Changfeng returned with two SUVs, plus two more vehicles that were to be unveiled Monday.Carlos Osorio / AP
/ Source: The Associated Press

In a year where toys made with lead paint and tainted toothpaste fueled distrust about the "Made in China" label, Chinese automakers still are showing increasing interest in cracking the lucrative U.S. market.

It may be a challenge to persuade American drivers to buy Chinese, observers say. But with high-profile recalls failing to squelch demand for China-made products, the day for Chinese cars on U.S. roads is nearing.

"It really comes down to a quality product at a good price," said Chris Byrne, a New York-based toy consultant. "If the Chinese are able to deliver a car that runs at a good price, I think a lot of the stuff about country of origin becomes a tempest in a teapot."

Record imports last year, including shipments of toys, are contributing to the widening trade imbalance with China. And Byrne said that while the recalls prompted some American consumers to say they wouldn't buy toys made by the world's largest toy manufacturer, cheap prices mean they still sell.

"You can always buy a Mercedes if you don't want to do that," Byrne said of the prospect of buying a Chinese-made car. "But I think the reality is people are buying costume jewelry at Wal-Mart, not at Tiffany."

Auto analyst Rebecca Lindland, however, said China's automakers were dealt a setback in their U.S. ambitions with the international attention on Chinese product safety — especially recalls related to a pet food ingredient linked to dog and cat deaths in North America, as well as lead-laced toys.

"They have inadvertently touched on the first two things you don't hurt: Children and pets," said Lindland, of Global Insight, an economic research and consulting company. "People are still buying them, but they're buying them reluctantly. The awareness of where products are sourced from is higher."

The Chinese companies have used the past year to work on the quality and performance of their vehicles, but they'll need to convince American drivers that an inexpensive, Chinese-made car is a better value than, for example, a used car by an established American or Japanese company.

"This is not a decorative item on your house or a piece of clothing," Lindland said. "This is your car. ... The significance of this is much greater."

Two years ago, a lone Geely Automobile Co. sedan marked the first time a Chinese automaker displayed at the North American International Auto Show. Last year, Geely was absent, but China's Changfeng Motor Group showed a pair of small sport utility vehicles and two pickups in a more polished display.

This year, four Chinese automakers and an importer have displays. Geely is back with eight vehicles, and Changfeng returned with two SUVs, plus two more vehicles that were to be unveiled Monday.

BYD Auto Co. was showing five and has hopes for selling in the U.S. market in three to five years. Henry Z. Li, general manager of BYD's auto export trade division, said the company is aware of the worries U.S. buyers might have in considering some of the first China-made cars on the U.S. market.

"It takes time for us," Li said. "We focus on quality. We first have to make ourselves successful in the Chinese market."

Another Chinese automaker at the show is Li Shi Guang Ming Auto Design Co., which is displaying a collection of tiny, bubble-shaped cars that look better prepared to carry golfers on fairways rather than travel U.S. roads.

China's Chery Automobile Co. doesn't have a display at the show but has plans with Chrysler LLC to jointly produce and export small cars to the U.S. and Western Europe. Global Insight's forecasts call for those cars, sold under Chrysler's Dodge brand, to be the first from China on U.S. roads, likely in 2010.

But China America Cooperative Automotive Inc., an importer that is showing a pickup and SUV made by a Chinese company, hopes to be selling the vehicles in about a year, followed by a crossover and sedan. Chamco is signing up mostly existing dealers across the U.S. to sell the vehicles.

"These are ... durable, quality cars," William Pollack, Chamco's chairman and chief executive, said in an interview Sunday, the first day of media previews at the auto show. "I think the consumers will embrace the cars."

Pollack said his company — and the Chinese — recognize the importance of getting it right when selling to U.S. drivers. Chamco has focused on making sure quality is high and prices are low, an estimated 20 percent less than comparable models. Styling, he noted, follows that of established automakers.

Jack Nerad, executive market analyst for Kelley Blue Book in Irvine, Calif., said Japanese and South Korean companies faced similar quality concerns in their earlier days in the U.S. as those now facing Chinese automakers. Key, he said, will be how well those first cars stack up against current models in the U.S. market.

"It's an obstacle, but certainly not an insurmountable one. There certainly will be some skepticism about Chinese-built cars," Nerad said. "They have to hit the ground with high quality. Stumbles early with product quality can be devastating."

South Korea's Hyundai Motor Co., for example, faced driver dissatisfaction with some of its first vehicles in the U.S. But a focus on quality and styling improvements, along with the introduction of the industry's first 10-year, 100,000-mile limited powertrain warranty, helped ease consumers' worries.

Lindland said it's naive to think that Chinese carmakers won't find successes in the wake of Japanese and South Korean automakers. But she noted the fate of the cheap and much-maligned Yugo, which was exported from Serbia to the U.S in the late 1980s before being pulled from the market in the early 1990s.

"Yugo came and didn't succeed," Lindland said. "Just coming to the U.S. does not mean success."