Bumpy drive to America

By Wang Cong Source:Global Times Published: 2017/6/12 17:23:39

Chinese carmakers eye US market, despite daunting difficulties

Workers assembly Trumpchi GS-8 cars at Guangzhou Automobile Group in October 2016.Photo: CFP

If a consumer buys an iPhone in the US, he or she would find a tiny note on the lower back of the widely popular device that reads: "Designed by Apple in California. Assembled in China."

The fact that the iPhone was made in China doesn't seem to bother millions of its users in the US. But for China-made cars, it's a different story, let alone cars designed and manufactured by a Chinese company.

"I would probably look at the reviews and safety ratings more than I would for another car," Nick Lowman, a 23-year-old resident of Flagstaff, Arizona, said when asked if he would buy a China-made car.

Lowman, who has lived in China as a student for one year, could not name any Chinese car brand. "What are the big Chinese car brands?" he asked, before adding he "definitely recognizes Geely's logo."

He told the Global Times that he would not be alone in failing to name a Chinese car brand. "I think if you ask someone [in the US] to name a Chinese branded car, they would say Toyota or Hyundai," he said.

Lowman's sentiment over China-made cars - suspicion of their quality and safety levels and lack of knowledge of Chinese car brands - represents the barrage of unnerving difficulties faced by Chinese carmakers that aim to enter the US market.

Ambitious attempts

Such difficulties, however, do not seem to turn many ambitious Chinese carmakers away from attempting to sell their cars in the world's second-largest auto market.

Motivated largely, according to experts, by the notion that entering one of most advanced and competitive markets in the world could boost their global image, Chinese companies have, over the past few years, made extreme efforts to sell cars in the US.

One of such efforts by Chinese companies includes increased appearances at auto shows in the US. In January, Guangzhou Automobile Group showcased three independently developed models at this year's North American International Auto Show in Detroit, Michigan, signaling its interest in the US market.

The three models, under the name Trumpchi, whose pronunciation resembles its Chinese name Chuanqi and partially US President Donald Trump's last name, were among the fastest-growing cars in the Chinese market by sales. In 2016, combined sales of the models reached 370,768 units, an increase of 97 percent year-on-year, domestic auto news website autohome.com reported on January 1.

The company reportedly plans to launch its Trumpchi GS4 crossover sometime in 2019.

Other Chinese carmakers that have attended the North America International Auto Show include BYD Company Ltd, Zhejiang Geely Holding Group and Brilliance Auto Group.

However, domestic carmakers' seemingly growing interest in the US has been largely overshadowed by failed attempts to gain a firm position in the US market.

In 2002, Tianjin FAW Xiali Automobile CO made the news when it announced to export its cars to the US market. The company further announced that it was planning to sell 25,000 cars in the next five years, but soon after, the plan was abandoned due to small profit margins and low sales performances, according to media reports.

In 2005, Chery Automobile Co announced it had teamed up with US firm Visionary Vehicles to begin exporting cars to the US market. But by October 2006, Visionary said it had parted ways with Chery, saying the Chinese company's cars didn't meet US standards, according to a report on Caixin Weekly, published on May 22.

Also in 2005, Geely sent 12 cars to be assembled to meet US standards, but they failed to pass emissions test, Caixin Weekly reported. Chery later disputed that its cars had failed the tests, the report said.

'Not ready'

The failed attempts showed that, despite recent success in the domestic market, Chinese automakers were not ready for the US market, a market with some of the toughest competitions and regulations, experts say.

"The US market is very advanced and there are so many different regulations," Wang Xin, a senior analyst at Beijing auto news outlet Global Auto, told the Global Times on Sunday.

For Chinese cars, which have no advantage in branding and technologies, it is hard to compete in the US market, Wang said, noting that the US market is "one of the most competitive markets with strong anti-foreign sentiment."

Zeng Zhiling, an analyst at Shanghai-based consultancy LMC Automotives, also said for domestic carmakers to pay "such a high attention to the US market is premature and the loss of which outweighs the gain."

Tough competition and regulations set the standard and create a lot of uncertainties and risks for domestic companies, Zeng told the Global Times on Thursday.

Despite the US market struggle, Chinese carmakers have been growing fast in recent years in the domestic market, thanks to a boom in the sports utility vehicle segment. In 2016, sales of Chinese branded cars passed the 10 million unit mark for the first time and increased its share in the domestic market to 42.7 percent from 40 percent in 2013, sina.com reported on January 17.

This might have boosted the confidence of some carmakers and fed their global ambition, but the truth is that Chinese carmakers are not ready to compete in the US, both in technologies and marketing strategies, experts said, noting China still relies on foreign technologies for some car parts.

Path ahead

However, there are some positives ahead for Chinese carmakers with regard to expanding their businesses on a global stage, experts noted.

For instance, Chinese carmakers could team up with foreign carmakers to produce cars for exporting to the US, which would be less risky and would help Chinese carmakers gain more experience, Zeng pointed out.

There have been some recent examples that indicate this positive path ahead. Geely, which bought Swedish carmaker Volvo a few years ago, started to export Vovlo's China-made S60 Inscription to the US in 2015. US carmaker General Motors also started to sell China-made Buick cars in the US in the same year.

In addition, experts said Chinese carmakers should pay more attention to some emerging markets such as the Middle East and South America, where market regulations are not as tough as that of the US and thus inexpensive Chinese cars have a great advantage.

China-made cars have been exported to countries such as Chile, Brazil, Iran and Russia, showing how exporting volume has been on the rise. In the first five months of 2017, Chinese auto export stood at 350,000 units, an increase of 40.9 percent year-on-year, according to data from the General Administration of Customs Thursday.

Still, like many other China-made products, Chinese cars could also succeed in the US.

"If the price was right… I would still probably buy a Chinese car before I would an American car," Lowman said.

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