EMERGING MARKETS ANALYSIS: Chinese in Paris – not with a bang, but with a Wingle
There's a pecking order for exhibitors at the Paris Show. Not surprisingly, the French manufacturers dominate the main Hall, with their European and Asian rivals further away from the front door, writes Mark Bursa.
New exhibitors find themselves tucked away at the back of one of the more distant halls. The Koreans and Malaysians started here in the 1980s and '90s, but now these graveyard sites were this year the domain of the handful of Chinese automakers brave enough to enter the French market.
Just three Chinese automakers took the plunge - Great Wall, Xinkai and Landwind, with utilitarian SUVs the centrepiece of the offerings on each stand. But perhaps more significant was the absence of either of the two highest-profile Chinese independents, Chery and Geely. Surprising, perhaps, as Geely exhibited at last year's Frankfurt show, and at the Detroit Show in January.
Also absent were the two Chinese companies preparing new versions of former Rover products - Paris 2006 was perhaps too son for Nanjing Automobile and Shanghai Automotive, though SAIC's Korean subsidiary Ssangyong was present.
However, the low-key nature of the Chinese presence at Paris was indicative of a sea-change in the export strategies of Chinese automakers. Rather than rushing to market, there is a clear indication that the better-resourced Chinese companies are throttling back on the ambitious plans announced in 2005, and are instead taking their time to get product, brand, distribution and service in place before entering sophisticated and competitive Western markets
There are several reasons for this. One of them was on display. The notorious Jiangling Motors Landwind SUV hit the headlines for all the wrong reasons last year when it failed an independent German crash test. The film of the test is horrific - in a 64kmh front-end impact, the car's front-end collapses catastrophically, pushing the front wheel - and presumably the engine - back into the cab, while the steering column is pushed back into the driver's head. The driver would not have survived, German safety agency ADAC concluded.
Because the car was imported under single type approval, it fell outside the scope of EuroNCAP testing, so avoiding the embarrassing nul points score it would surely have received.
The Landwind incident shocked the Chinese automakers. The story broke just before the 2005 Frankfurt Show, and for the Chinese automakers at the show, attention was focused on safety issues rather than their products and plans.
The fact remains that standards - both for safety and for emissions - are lower for the Chinese market than for the developed world. And automakers are still low on the learning curve, with products based on obsolete foreign designs, obtained either legally or through "piracy" of intellectual property, and manufactured by a relatively inexperienced workforce. The Landwind SUV is based on the Isuzu Rodeo, a 1980s design familiar in Europe as the Opel/Vauxhall Frontera. But it's clearly not a Frontera - that car gained a three-star EuroNCAP rating.
Landwind is undeterred by the incident. As well as the ill-fated SUV, which it claims has been improved in terms of safety, the company showed a second vehicle, the Landwind Fashion, a mini-MPV that has been developed jointly by Jiangling and another, more high-profile Chinese automaker, Changan. Changan is the partner of Ford in China - and the Fashion has more than a hint of Mazda about its lines. It'll be interesting to see how it fares in European crash testing.
The Landwind SUV debacle is the reason why Geely was absent from the Paris Show. At Frankfurt, the company showed five China-market cars that it planned to adapt for export. Now it says it'll develop all-new vehicles for western markets, built with input from European design and engineering consultants. A plan to launch the Geely range in the US in 2008 has been put on hold, and its participation at the 2007 Detroit Show is now in doubt.
Instead of bullish plans to enter the US as a low-cost, high-volume maker, Geely is now likely to head for the niches, with lower volumes, potentially higher profits and lower risk.
Its rival, Chery, is also delaying its plans for US market entry with American entrepreneur Malcolm Bricklin's Visionary Vehicles. Indeed, Chery may be looking to exit its relationship with the Bricklin; most analysts believe his goal of 250,000 sales a year is laughably unrealistic.
The fact that Chery and Geely signed up with gung-ho wheeler-dealers such as Bricklin or John Harmer, now a consultant to Geely rather than its US COO, shows that these companies were naïve in the extreme a couple of years ago - but considerably less so now.
By taking a more cautious approach, they will be able to get their product right, letting the likes of Landwind make their mistakes for them. And they might also use the time to sort out the issue of branding. What works in China clearly doesn't work here. Cheerful Chinese names translate as laughable nonsense. European consumers have been spared a small car from First Automotive Works, based on a 10-year-old Daihatsu design, because - guess what - it failed European crash test rules. Its name? The Happy Emissary.
Or how about a Great Wall Wingle? There was one at Paris - it's a rugged looking crew-cab pick-up, ideal for construction work, though it's unlikely any builder would be able to keep a straight face when told to "park your Wingle round the back".
Great Wall, in fact, is clearly one of the better Chinese automakers. Its Hover SUV is slightly less comically named, but looks good, and will meet full European Type approval. Crash tests have been carried out in China to European standards, and Great Wall claims the results are to world standards. The Great Wall name leaves no doubt as to the country of origin, but at least it's pronounceable. And judging from the positive reaction to its cars, Great Wall will find distribution in Europe.
Perhaps the best reason for the Chinese automakers to take their time over exports is the continuing growth in their home market. First-half growth of 27% over 2005 means there's plenty to keep domestic automakers busy. Companies such as Geely and Chery are still young and have relatively low volumes - below 200,000 units in 2005. Perhaps establishing more solid foundations in China would be no bad thing before taking on the world.
Meanwhile there will be plenty of other small Chinese automakers prepared to export to the west. The third Chinese company on parade at Paris was Xinkai Motor. Its small stand featured another SUV based on - guess what - the Isuzu Rodeo. It looked even cruder than the Landwind - though it would be unfair to speculate on its Euro NCAP rating.
Its importer, Eurauto, has the EU flag as part of its logo - but is based in Beirut, Lebanon. Eurauto claims to have the distribution rights to Europe, but it's hard to imagine it finding too many buyers for the cars on show in Western Europe. Might be just the thing for Beirut, though.