The beginning of morning rush hour, cars on the highway traveling to and from downtown
Every year, Chinese automakers make the rounds of key North American and European auto shows. And, every year, analysts and industry watchers dismiss any near-term possibility of these automakers making the long-awaited leap of selling cars in our neck of the woods.
This year was no different. The Guangzhou Automotive Group Ltd. (generally referred to as GAC) showcased three of its models in Detroit in January. In Geneva, Qoros — a joint venture between China’s Chery Automobile and Israel Corporation — generated significant buzz when it debuted its trio of luxury vehicles. While the latter’s 3 Sedan drew good reviews, there were strong hints of condescension in responses from Western experts.
But every time, the fundamentals shift a bit. With deft little business moves here and there, Chinese car companies continue to entrench themselves in the global business of automaking, narrowing their technological, qualitative and strategic gaps inch by inch.
Geely’s purchase of Swedish carmaker Volvo in 2010 is the most obvious example. Geely, along with Dongfeng Motor Corp., are now lining up to buy struggling electric car startup Fisker Automotive.
Great Wall Motor Co. and Chery recently entered Australia as a kind of testing ground to prep themselves for selling cars in the developed world. Despite an asbestos-related recall on 23,000 vehicles from both these automakers last year, Great Wall has managed to move over 30,000 cars within three years and its sales are expected to double in 2013, according to a report by CarsGuide Australia. Just to compare — it took the now-venerable Hyundai five years to sell its first 25,000 units down under.
Chinese companies are also showing an insatiable appetite for electric-vehicle battery companies. Asian auto tech behemoth Wanxiang has received purchase approval for bankrupt lithium-ion battery maker A123 from the U.S. government. Wanxiang is also funding commercial electric vehicle maker Smith Electric. Other Chinese companies have made similar investments in various EV-related companies.
At first glance, these developments appear slight, or even downright daft. The price tags for A123 and Fisker may be heavily discounted but what are the odds of turning around ailing companies that specialize in a technology that’s going nowhere. The Volvo deal may seem a tad more prudent but the company hasn’t shown much progress financially since the takeover.
But consider this: a global vehicle safety pioneer such as Volvo may have a few valuable, and timely, lessons for its current owners.
Just like Toyota and Hyundai of yore, today’s Chinese automakers are persona non grata as far as vehicle quality is concerned. Indeed, safety concerns always loom large over any discussion about China’s entry into the North American vehicle market.
In this light, a planned research and development centre in Sweden involving Volvo and Geely could be a critical step in the latter’s bid to win over the Western world. In fact, Geely chairman Li Shifu has gone on record stating that the company “will continue to improve its product quality in the years to come and can learn from Volvo Cars.” No surprise that out of the 200 people expected to work at the centre more than half are expected to be Chinese.
Geely is not the only one getting its ducks in a row. In Geneva, Qoros flaunted its team of automotive blue-bloods: former Mini chief designer Gert Hildebrand and former Volkswagen North America executive Volker Steinwascher.
Similarly, there may be more than meets the eye in the flurry of EV-related investments. With their well-established capability of building inexpensive versions of pretty much anything, Chinese companies could possibly target one of the key pain points of alternative vehicles — price. Imagine a $20,000 EV for U.S. and Canadian buyers — sound like a potential game changer?
The above are just some future possibilities. Exactly when and how Chinese automakers will strike is anyone’s guess. It will be a tough climb as the current political, cultural, economic and regulatory environment is far less conducive for China than it was for their Asian predecessors. GAC officials said that they have no short-term plans to sell in North America, although they confirmed that they are in talks with U.S. regulators about vehicle standards. Qoros executives were bolder, outlining initial plans to test waters in Eastern Europe and then move westward.
But I think automakers would best served by turning a certain well-known adage on its head. As far as China’s presence goes, objects in your rear-view mirror may just be much closer than they appear.
Kumar Saha is a Toronto-based automotive analyst with the global research firm Frost & Sullivan