Chinese manufacturers were again in attendance at last month’s Detroit Motor Show – and in greater numbers than ever before at an international motor show outside China. But how close are the Chinese to finding a way into Western markets? Mark Bursa examines progress.
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Last year, just one manufacturer showed up at the Detroit Show – Changfeng Motor – and its comical “propaganda film” and curious concept cars did little to advance the Chinese cause. But this year, four other Chinese companies joined Changfeng, including two full-range carmakers, and a Chinese design studio. The bar has been raised, but now the dust has settled, what have we learned?
Firstly, we’ve learned that the Chinese are learning. Changfeng’s presentation was a lot more geared to a foreign market. Gone was the strident corporate video with its “leaping dragons” voiceover and images of Chairman Mao. In its place was a slick promo film of some of the company’s cars.
And the new production models on its stand appeared to be better built and finished than the ones shown in 2007. At Detroit, two new models were unveiled – a new SUV called the Liebao CS7 and Changfeng’s first passenger car – a compact MPV called Kylin, styled by Italy’s Pininfarina. This was clearly a prototype, and fit and finish was shy of Western standards, but compared to the oddball Rhombus concept shown 12 months ago, it’s something of a great leap forward.
Changfeng in Detroit to learn
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By GlobalDataChangfeng is here to learn, and to make contacts, said the company’s studious-looking chairman, Li Jianxian. Without tying down a timescale, he confirmed that Changfeng was now looking at launching in Europe as well as North America, perhaps as early as late 2009. Li said he was looking to set up SKD manufacturing in Europe, and Changfeng is looking for an assembly partner in Europe. Li said the company wanted to become a global player. “Changfeng must step out of our comfort zone into global competition. It is the only way to establish ourselves as a truly global player.”
The CS7 would be the likely entry model, especially for the US – as it’s a lot easier to gain type approval for body-on-chassis SUVs, classed as “trucks” in America. Both the CS7 and the larger Liebao CS6, shown last year, are now on sale in China, and Li said the company planned to launch two new models every year.
Li said Changfeng would make a Detroit appearance a regular event – and promised to reveal exact details of the company’s US launch plans at the 2009 event. “We are investigating how best to come to the US,” he said. “We are hopeful we could be present in the market within two years.”
Achievable? Possibly, though many feel Changfeng may struggle, especially if it decides to go it alone. As well as homologation, issues of branding and distribution need to be addressed, and it would appear that Changfeng has given little attention to these issues. In any case, it won’t be the first Chinese brand to market – that honour will go to another SUV brand, ZXAuto.
Chamco recruiting dealers
This is a much more workable proposition, simply because it is being driven by an independent US importer, Chamco, a company that has been established specifically to bring Chinese cars to the US. And Chamco has quietly been getting on with the important issues of securing type approval and recruiting dealers, getting it to a point where it will be ready to import its first cars to the US before the end of 2008, according to Chamco CEO and founder Bill Pollack.
The vehicles – a pick-up and SUV built by Chinese manufacturer Hebei Zhongxing – were on show in the foyer of Detroit’s Cobo exhibition centre during the press and trade days – but were gone before the public opening. Pollack wants to keep his powder dry until he’s got his branding and dealer network lined up.
Branding is the big problem – the ZXAuto name, the Chinese manufacturer’s internationalised version of Zhonxing – has been used by Chamco so far, but there are problems. It seems the Chinese were not scrupulous enough in registering the brand worldwide, and Pollack can’t use it in the US, so a different name will be used. It’ll be announced later this year, when the consumer launch takes place.
Meanwhile, the cars are close to homologation, and dealer recruitment is already under way, with around 75 dealers signed up to date, half the target launch network – or an average of three per US state. Eventually, Pollack wants 400 dealers – a large city such as Detroit would be served by four dealers.
Pollack said many of the 150 initial dealers were Ford dealers looking to add other franchises, and there was also interest from Toyota dealers “whose fathers and grandfathers had the vision to take on Japanese franchises 30 years ago, and who see the same opportunity now with Chinese brands”.
Chamco sees the dealers as offering multiple brands – a broadly similar concept to the German China Auto importer that caused a stir at Frankfurt last year, with an ‘umbrella’ retail brand offering multiple Chinese marques. This goes some way to addressing the Chinese branding issue, with the emphasis shifting toward building a retail brand rather than a vehicle brand. Pollack said he was in discussions with other Chinese manufacturers, with non-competing ranges to Zhongxing.
Being able to handle homologation is central to Chamco’s business, and motorsport specialist Steve Saleen has joined Chamco to head up its technical operation. Indeed, Pollack said Chamco was happy to help with homologation for other Chinese marques looking to distribute through their own network.
The vehicles will be priced below equivalent Korean or Japanese models, at around USD14,000 for both pick-up and SUV. “We’ve seen Japan and Korea become successful – now it’s China’s turn,” Pollack said. But his low-price route means Chamco is following the route taken by the Japanese in the 1970s and the Koreans in the ‘80s and ‘90s – low cost. This is fine so long as China maintains a substantial cost advantage.
But it means the bargain basement end of the market will become very crowded if many Chinese automakers take this approach – undercutting Kia and Hyundai is fine, but then their competitors will effectively be nearly-new cars (first-year depreciation typically slices off 25% of a car’s value) – so the Chinese import has to be priced at that kind of discount if it is to be as attractive as, say, a one-year-old equivalent Toyota.
So perhaps the Chinese are starting to realise that entering competitive western markets on price alone is not the best way to succeed. And judging by the presentations given at Detroit by the two larger, full-range Chinese automakers, the penny is starting to drop.
Geely’s ‘gift to mankind’
Geely, which appeared at Detroit two years ago, but stayed away in 2007 while rethinking its strategy, focused on technology. Chairman Li Shufu spoke at length about an electronic tyre blowout safety system the company has developed called BBMS. Li rather grandly described the system as “our gift to mankind”, though really it appears to be a fairly straightforward piece of technology, linking tyre pressure monitoring and ABS – the sort of thing engineers at Bosch could probably knock together in an afternoon.
But Geely showed a film of the system working, evidence that the company’s R&D capability exists and has reached a level of competence. And that was the real point of the exercise. Li said: “People do not believe that Chinese brands are doing innovative work. We want to show that we are.”
Geely is China’s largest non-aligned automaker, and it clearly is not ready to sell cars in the US yet. It showed a selection of China-market sedans, hatchbacks and coupes – as well as a version of the LTI TX4 London taxi, which Geely builds under license in China. But while most of these cars are unlikely to be sold in the US or Europe – only the FC small sedan, 100% developed in-house, has a chance of being adapted for exports to developed markets.
BYD charged up
Also present was BYD, a relative newcomer to the Chinese auto sector, but a company with a genuine claim to innovative technology thanks to its core activity – making batteries for laptops and mobile phones to companies including Nokia and Motorola.
BYD has only been an automaker since 2003, when it acquired small carmaker Qingchuan Motor. The company’s core business is producing batteries for mobile phones. Since then it has developed its auto business, selling more than 100,000 cars in China in 2007, and the company sees major synergy between its batteries and its cars.
The four BYD cars on show were the usual nondescript China-market models – OK-looking sedans and hatches with little to commend them in terms of originality. But under the skin was where the technology gets interesting. A version of the F6 large sedan was fitted with BYD’s DM (dual mode) electric hybrid system, a technology that the company claims will revolutionise alternative powertrain systems.
“We believe DM technology will replace current hybrid technology,” said BYD vice-president Micheal Austin. “It will change the world as we know it today.” This is not quite the breakthrough that Austin claims – it’s broadly the same as the plug-in hybrid systems GM and Chrysler was also, er, plugging at Detroit.
But BYD has an established battery technology and a Chinese cost base – so it has a major advantage. The specification was close to workable – the F6DM has a range of around 60 miles in electric mode and a further 190 miles when using the gasoline engine as a generator to charge the battery pack. And BYD’s new ferrous batteries have a rapid charge facility – BYD said they can be recharged to 50% of capacity in just 10 minutes, though a full recharge takes 9 hours.
This is a lot better than the performance being talked about by the likes of GM, whose plug-in hybrid Saturn Vue SUV can travel just 10 miles as a pure EV, and whose lithium-ion batteries lack a fast-charge facility.
What’s more, the F6DM is ready now. It will go on sale in China later this year, with a USD6,000 price premium over the standard F6. The cars won’t go on sale in the US until 2010 at the earliest, though when BYD does launch, it’ll have something that no other Chinese automaker has – a major differentiator as a hybrid and EV specialist. And this could mean BYD can market itself as a premium, not a budget brand.
Austin believes the greatest potential exists with the DM and battery technology. He would like to offer it to a partner, but said none of the US Big Three had expressed an interest.
BYD is planning to attend the Geneva Show in March, and will show new Europe-oriented models. It’s also likely to show the F8 coupe-cabriolet and the F3R hatchback, both of which are on sale in China. Eco-conscious European automakers might also be keener to get into bed with BYD too.
Mark ‘Coolbear’ Bursa
