Winning America Can Be Finally Possible, Thinks Chinese Carmakers

While no mainland China car brand has yet to crack the U.S. market, American automakers sold 2.96 million vehicles in China last year.

As far back as a decade ago, having set—and failed to achieve—timetables to begin U.S. sales were Zhejiang Geely Holding Group and BYD, two large Chinese carmakers, and hence it hasn’t been for lack of trying.

Now, the third time could spell success, believes Guangzhou Automobile Group.

Its Trumpchi brand was showcased on the main show floor of the North American International Auto Show in Detroit in January by GAC, as the automaker is known.

Producing cars with Toyota, Honda, and Fiat Chrysler Automobiles (FCA) in China, GAC is a state-owned company. As part of a broader push by the country to promote indigenous brands, it started Trumpchi—a phonetic rendering of the brand’s Chinese name that’s also a play in English on “China’s trump card” in 2010.

“If we make it work in the U.S., it’ll help us with our international expansion and greatly enhance our brand image in all markets,” says GAC President Feng Xingya.

How tough it is for a new overseas brand to make it in the U.S. is recognized by him.

But because of the wild card of U.S.-China relations, President Trump’s positions on trade, currency manipulation, and the One China policy already raising tensions between the world’s two biggest economies, could make his job even more difficult.

How international tensions can pinch its operations has been witnessed by GAC. As Chinese consumers boycotted Japanese brands, including those that GAC manufactures on the mainland, GAC suffered a 74 percent plunge in profit in 2012 when bilateral ties between China and Japan nose-dived.

Motor Trend advised its readers not to “necessarily expect the products to be laughable when they arrive—at least not for long.” It said that the quality level “Korea managed a couple of vehicle generations ago” appears to have been achieved by GAC.

The quality level “Korea managed a couple of vehicle generations ago,” appears to have been achieved by the GAC, it said.

“Chinese brands are fast closing the quality gap with Western automakers, but they will need to meet much tougher U.S. emissions and safety standards,” says Michael Dunne, the author of American Wheels, Chinese Roads who’s working on a book about Chinese automakers coming to America. “Chinese carmakers will have to earn American consumers’ trust, just as the Koreans and Japanese before them. This could take 10 years.”

GAC will have to convince American dealership owners that it can become a lasting and profitable venture—no easy task to build a U.S. distribution network to sell and service its cars. “How much would dealers be willing to invest in an unknown brand from China?” asks Frank Ursomarso Sr., whose Union Park Automotive Group sells Honda, BMW, Volvo, Buick, and Jaguar cars in Wilmington, Del. “Not much money, I believe.”

No revenue from servicing cars or selling used ones are got by dealers with a new brand, he says. “I would rather sell more vehicles for brands I have than be a pioneer for a new Chinese brand,” he says.

In building a network of dealers in the U.S., GAC could seek help from FCA, with which it manufactures Jeeps in China, Feng says.

GAC may have to borrow from Hyundai’s playbook, to persuade American consumers to take a chance on an unfamiliar brand. In part to overcome a reputation for poor quality, in 1998, South Korea’s largest automaker began offering a 10-year warranty on its vehicles. “Hyundai only gained real, sustained traction after it offered a 100,00-miles, 10-year warranty,” says author Dunne, a Hong Kong-based former GM executive who now runs his own advisory firm, Dunne Automotive. “Chinese companies won’t find any shortcuts here.”

(Adapted from Bloomberg)

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