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

China automakers gear up to expand overseas

Some Chinese automakers are gearing up for expansion overseas, having seen sales of their compact cars soar in China at a time of slowing growth for bigger automakers like Volkswagen and Toyota.
A worker welds the interior of a car at the Geely auto factory in Ningbo, China, earlier this month.Eugene Hoshiko / AP file
/ Source: The Associated Press

It was one of those awkward moments for an up-and-coming automaker: as an alarm sounded, workers in bright blue uniforms rushed to rebalance an auto body that had gone awry on the assembly line.

It may be still close to its humble beginnings, but Geely Group, a privately owned Chinese car manufacturer, has global ambitions.

Geely and fellow Chinese upstart Chery Automotive are gearing up for expansion overseas, having seen sales of their compact cars soar in China at a time of slowing growth for bigger automakers like Volkswagen and Toyota.

Geely’s Merrie, Maple and Haoqing economy models already are sold in almost 30 countries in Asia, the Middle East and Eastern Europe. But the company, based in Ningbo, a port city south of Shanghai, is looking further West.

“We’re planning to explore other markets in Europe. We’re planning to export our cars to America,” An Conghui, general manager of Zhejiang Geely Automobile Co., said during a tour of the company’s main factory.

“Of course there are difficulties, but we can overcome them,” An said. “Our goal is to meet the requirements of every market.”

Geely confirmed last month that it was in preliminary talks to acquire molds and production equipment from MG Rover, though it said it had no intention of buying into the bankrupt British automaker.

The company also signed a memorandum of understanding this month with the Hong Kong Productivity Council, a government-run business promotion body, to begin research on development of a new car model in Hong Kong.

Geely’s two mainland Chinese auto companies — Zhejiang Geely Automobile Co. and Shanghai Maple Guorun Automobile — sold 96,683 sedans in 2004, up 27 percent from 2003. It claims just over a 4 percent share of China’s market for passenger cars. Geely models retail for between $3,600 and $9,600. Its top model, the Beauty Leopard sports car, sells for up to $17,000.

Until recently, China’s vehicle exports were limited mainly to buses, trucks and farm vehicles sold to developing countries. But that is fast changing as automakers upgrade technology and expand production in hopes of competing internationally.

Geely exported 5,200 cars in 2004 and plans to more than double its exports this year to 12,000 units, An said. The company aims to eventually have two-thirds of its sales outside China.

Chery Automotive, whose base is further north in east China’s Anhui province, has announced plans with auto importer Visionary Vehicles — run by entrepreneur Malcolm Bricklin, best known as the man who brought the Yugo to the U.S. — to eventually sell 2 million Chery model cars in the United States. The company plans to begin offering five models in the U.S., ranging from a compact sedan to an SUV, starting in 2007.

Analysts have expressed doubts, given that Chery only made 80,000 cars and exported about 10,000 last year, mainly to developing markets.

Masaki Taketani, an analyst who studies Asian markets for Detroit-based CSM Worldwide, said Chinese automakers aren’t expected to make a big dent in the U.S. marketplace until at least the next decade. For now, he said, China lags others in design, engineering and advanced technology.

Taketani said China likely will follow the model set by Japanese and South Korean automakers, who have slowly gained U.S. market share over the past two decades.

“They’ll increase sales little by little, but right now we’re not optimistic,” Taketani said.

Chery is pushing ahead with plans to export up to 50,000 cars this year and to begin production at factories in Iran and Malaysia with components shipped from China.

Apart from its QQ minicar, which sells for as little as $3,600, Chery also makes larger sedans like the Fengyun, Qiyun and Oriental Son, most of which retail for less than $12,000.

Geely signed an agreement in May with IGC Group of Malaysia, Southeast Asia’s biggest auto market, to export 10,000 complete cars this year and 30,000 complete knockdown kits of parts and components to be made into cars, to be assembled at a new plant there next year.

“Malaysia will be our production base for Southeast Asia,” said An. “Six or seven factories were vying to cooperate with us but we chose Malaysia.”

Those deals are just the beginning, says Yale Zhang, an auto market specialist for consulting firm CSM Asia Corp. in Shanghai.

“Will they become major exporters? It won’t happen within three to five years, but it might be on a large scale in five to 10 years’ time,” Zhang says. “The local ones are starting and the foreign (joint venture) ones will start to export when they find the quality is good enough.”

Geely’s tycoon founder Li Shufu started out making refrigerator parts, shifted to making refrigerators, then selling real estate and making motorcycles. The company, whose name means “auspicious benefit” in Chinese, began making cars in 1998.

During a recent visit to Geely’s Ningbo factory workers were busily stacking up components for the CK-1, called the “Ziyoudian,” or “Freedom Cruiser” in Chinese.

Although relatively new, the company’s spacious factory appears far less modern than those of its international competitors, including General Motors Corp.’s main Shanghai plant.

Only the robot-equipped welding station was fully automated, though workers stood by to steady the auto bodies as they were plucked from the station and moved to the next stage of production. Side panels are transferred by hand from one work station to another.

Geely’s efforts to improve efficiency are spelled out on signboards scattered throughout the plant.

“Take responsibility for the brand name, leave customers satisfied forever,” says a slogan hanging over the main avenue through the plant.

Geely’s top priority for now, An says, is to upgrade technology and build a brand name.

“The Chinese market is very good now. The market for our cars is very good,” An said. “But our goal is to sell to the whole world.”