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The Chinese SUV and pick-up maker Zhongxing used the recent US NADA dealer convention to unveil its plans to enter the US – perhaps as early as this year. Mark Bursa discovers another Chinese company with big ambitions.
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Another Chinese SUV-maker has announced plans to launch its vehicles in America. Importer Chamco Auto (China America Cooperative Automotive, Inc.) chose the National Automobile Dealers Association (NADA) convention in Las Vegas to unveil plans to launch pick-ups and SUVs made by Chinese car maker ZXAuto, and unveiled two cars at the show.
It becomes the second Chinese car firm to announce plans this year – and could be the first to have cars on sale, perhaps before the end of the year, and certainly before mid-2008. Another company, Changfeng Group unveiled a range of 4×4 and light truck models at the Detroit Show in January, but remains vague about a launch timeframe – few believe its cars will be ready before the end of this decade.
ZXAuto is the global marketing name chosen by small Chinese auto maker Heibei Zhongxing Automobile Co, based in Baoding, Hebei Province, around 150km south-west of Beijing. Two models, a pick-up called the Grand Tiger and an SUV called the Landmark, were on show in Las Vegas, and Chamco chairman Bill Pollack said they would retail for US$13,250 – around 80% of the price of established rivals’ equivalent offerings – with a dealer margin of US$1,650. A saloon and a ‘crossover’ are planned for 2009, he added. Pick-ups are expected to be the biggest seller, accounting for 90% of projected US sales.
The cars have been shown to dealers in several US cities in behind-closed-doors events, and Pollack said 22 dealers, mainly on America’s eastern seaboard, have signed up for the franchise. This involves an investment of $US300,000, but the dealers get an unspecified stake in Chamco for their investment. This won’t be a substantial stake – Pollack is looking for 150 dealers in total.
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By GlobalDataThe plan seems ambitious. Pollack wants to sell 75,000 cars in the US in year one – though Hebei Zhongxing only made about that number of cars last year. But the company is thinking big – it is gearing up production at three locations to build 300,000 cars a year by 2011. Last year, Zhongxing president Xiao Wei rather optimistically told China Automotive Revue: “Once you open up the American market, it’s not difficult to sell 150,000 cars a year.”
Most of the growth will come from a new factory that the company is building in Changchun, north-east China, which will build sedans and crossovers at a rate of 200,000 units a year, along with 500,000 engines a year. This new plant is a joint venture with another Chinese firm, motorcycle manufacturer Chanlin.
Zhongxing has an interesting history – it was formed in the late 1990s from the ashes of a collapsed Chinese pick-up maker called Tianye Automobile. This company was bought out by Brilliance China and restructured through a joint-venture with a Taiwanese company called Taiwan Unite Leading Co and another Chinese firm, Ningbo Huaxiang Group, which then replaced Brilliance in a complex deal. It was renamed Zhongxing Automobile in 1999.
Under the leadership of Xiao Wei, a former vice-president of Brilliance Jinbei, a new plant has been opened and R&D capabilities have been developed. The company’s R&D centre employs 150 people, and about half of the 87 senior engineers at the centre have more than 10 years’ experience in the automotive industry.
The company claims its current models were self-developed, together with China-market models such as the Admiral, Star and Cruiser, but in reality the cars owe much to Toyota’s HiLux pick-up. The Landmark SUV, unveiled in 2005, has a pick-up derived ladder chassis. The company’s website is coy about the vehicles’ origins – it describes powertrains as “Toyota-type”, for example.
The company’s new plant in Hebei province has a capacity of 80,000 units and a staff of 3,500. These are modern facilities, including a stamping shop housed in a 9,334sq m building with three press lines and one uncoiling line, capable of producing 60,000 panel sets a year. A larger 15,000sq m building houses three main welding lines and five sub-welding lines; and this feeds into a 14,680sq m final assembly shop. A smaller, older plant makes older pick-ups such as the Admiral, a straight copy of the Toyota HiLux at a rate of 30,000 units a year.
Zhongxing has been exporting to other emerging markets since 2000: it has a deal to export 3,000 Grand Tiger pick-ups to Libya and 1,200 Landmarks and Grand Tigers to Ukraine. It has low-key CKD operations in Iran and Egypt, but is looking to set up CKD plants in Vietnam and Malaysia. It also signed an agreement with Russian CKD assembler Avtotor of Kaliningrad in 2005, which will see Avtotor import 75,000 CKD vehicles over a five-year timeframe.
Pollack said the cars were being tested in China and should meet US crash testing standards. Failure to meet these has delayed US export plans by other Chinese firms, including Chery and Geely. Geely now says it will develop specific export models rather than adaptations of its current China-market range, while Chery is now concentrating on setting up a deal to build the small Dodge Hornet car for DaimlerChrysler.
While these manufacturers are floundering, ZXAuto is doing a lot of the right things. The company has appointed foreign managers with expertise in key areas such as safety, crash testing and marketing; and it has avoided unpronounceable company and model names – even shortening Zhongxing to ZXAuto. Even so, Land Rover’s lawyers might like to take a look at the way ‘Landmark’ appears on the SUV’s badges.
There could be a potential problem with the cars’ “unofficial Toyota” heritage too, though they do appear different enough from current Toyota models to avoid lawsuits – in the same way that Great Wall’s pick-ups have evolved past their “bogus Nissan” roots.
In China, Zhongxing sees Great Wall as its key rival – indeed, the two companies seem to be on eerily parallel paths, with matching model ranges and plans to expand into sedans, MPVs and crossovers in a new plant. The only difference is that ZXAuto is targeting the US as its main export market while Great Wall’s attentions are on the other side of the Atlantic.
Coincidence, or central planning at work? In truth, neither has the capacity nor the resources to enter both markets right now, so whatever the reasons behind the decisions, the solution is a pragmatic one that gives both manufacturers a chance of success.
Mark Bursa
