BIZCHINA / Li Shufu

Chinese carmakers set sights on US and Europe markets
(AP)
Updated: 2005-09-14 15:43

China's burgeoning auto industry has roared into the Frankfurt auto show, eager to create a splash with its new models and make inroads into the competitive European and North American markets.

Geely Automobile, part of Geely Holding Group, had the biggest presence, bringing five models including a sports car called the CD, for China Dragon.

Landwind Motor, part of Jiangling Landwind Motors, unveiled a four-wheel drive sport utility vehicle built in a joint venture with Ford Motor.

And Brilliance, a Chinese company that has a joint venture with BMW, showed off its Zhonghua sedan, slated to go on sale in Germany this year for 18,000, or $22,000.

The Geely Automotive chief executive, Li Shufu, said he was pleasantly surprised by the reaction the Chinese presence had caused.

"The European and U.S. markets are two of our dream markets, so we will strive to reach them," he said on Tuesday. "But we are currently still planning and we are not sure when we will get there."

While some other Chinese automakers assemble foreign-branded cars, Geely manufactures its own vehicles. Li said the company expected to sell more than 140,000 cars this year including about 10,000 for export, primarily to the Middle East, Africa and South America. Last year, Geely sold 100,000 cars, including 5,000 exports.

Peter Morici, a University of Maryland business professor who follows the automotive industry, said Chinese manufacturers stood to benefit from the disputes that European and American companies are having with unions over wages, benefits and working hours.

"U.S. and German automakers seem wholly unable to address their domestic labor problems, or lethargy in their own management," he said. "Importing cars from China may prove a survival tactic."

It has been a difficult road for Chinese automakers to bring their wares to Frankfurt. The show has strict requirements about its exhibitors, including that they have no ongoing intellectual property rights disputes and have a certain amount of market share.

"Many Chinese automobile manufacturers have not been allowed to participate because they could not meet these rigorous standards," said a spokesman for Geely, Zhang Xiaodong.

Compared with European and U.S. automakers, whose brands are ubiquitous worldwide, Chinese makers' market shares are tiny. The companies have some distribution in the Middle East, Africa and South America but are not well known outside Asia.

Even there, they face competition from the major Japanese automakers Toyota Motor, Honda Motor and Daihatsu Motor as well as Hyundai Motor of South Korea.

Rick Wagoner, the General Motors chief executive, said China had some barriers to overcome before it could become a real player in the market.

"I think it's going to be silly not to take the competitive threat seriously," Wagoner said. "If we haven't learned any lessons from Japan and Korea, we deserve the things that befall us. On the flip side, the growth in China continues to be so strong that our guess is that most of the capacity in China will be used to meet Chinese needs."

China has built 3.7 million cars this year, an 8.2 percent gain from last year.

The China Automotive Industry Association said sales of domestic cars rose 15 percent, to 2.4 million, last year. That compares with sales of 17 million vehicles in the United States last year and 16.8 million in Europe.

But Morici said Chinese manufacturers could follow a trail to European consumers already blazed by Japanese and South Korean companies.

"Europe has proven receptive to Japanese cars, and I think it will prove receptive to many Chinese cars," he said.

Another Chinese carmaker, Chery Automotive, which based in east China's Anhui province, was not at the show. The company has announced plans with the auto importer Visionary Vehicles - run by Malcolm Bricklin, the man who brought the Yugo to the United States - to eventually sell 2 million Chery cars in the United States. The company plans to offer five models in the United States, ranging from a compact sedan to an SUV, starting in 2007.

Lewis Booth, group vice president and chairman and CEO for Ford of Europe, said Chinese automakers will be a growing presence in the market and that Ford can meet the challenge with good designs and strong brands that hold their value.

Booth said it also will be important for the company to keep finding low-cost suppliers.

"At the end of the day, the business is going to be on the strength of the product," he said.


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