DETROIT – Five Chinese vehicle manufacturers planted the proverbial flag in Motown displaying products that they hope to one day sell in the United States and around the world.
At the 2008 North American International Auto Show only three out of the five companies – Changfeng, Geely, and BYD – held press conferences. With displays either in the public concourse area at the front of Cobo Center, or down in the convention hall’s basement where the likes of Daewoo and Yugo once eked out space next to the United Auto Workers’ stands, or information kiosks by insurance and oil companies, the Chinese companies drew the attention of a sizable contingent of journalists who were in town to cover the auto show.
The opinions regarding the significance of the five Chinese companies coming to Detroit ranged from interested to cautious to dismissive.
“The Chinese automakers are here and showing their flag,” noted David Cole, chairman of the Center for Automotive Research of Ann Arbor, Mich. The electric vehicle technology shown by BYD shows that it is a “very capable” company and “they are doing some interesting things,” he added.
Sounding a word of caution for the “Detroit three” – the name that has supplanted the term “Big Three” to refer to General Motors, Ford, and Chrysler – was Keith E. Crain, chairman of Crain Communications. The publisher of a number of consumer, business and trade newspapers and periodicals, including Automotive News, Crain had said in December 2007 that the Chinese companies are “building up steam… and have learned from the mistakes and the successes of the Japanese and Koreans” as they prepare to expand into the North American market.
“I think the worst (vehicles of the Detroit Auto Show) are down in the basement and are the products from China,” said Mike Jackson, chairman and chief executive officer of AutoNation, the largest dealer group in the United States with 257 new car stores. “We get folks asking us if we want to sell products from China and the unbelievable low prices we can have… and I say, I don’t want to be the one left holding the bag.”
The AutoNation chairman said he’d be willing to sell cars produced in China once they have the equivalent “technical expertise and support,” that large manufacturers have today.
Changfeng’s Second Bow
After debuting in Detroit in 2007, the Changfeng Group returned to the 2008 NAIAS to present its latest vehicles launching later this year in China – the Liebao CS7 sport-utility vehicle and the Kylin passenger car. Partnered with Mitsubishi, its chairman, Li Jianxin said he hoped Changfeng would be able to start exporting its vehicles to the North American market by 2009.
“As you know, China has become a key player in the global automotive industry,” Li said, speaking with a heavy accent that was at times difficult to understand. Fortunately, a transcript of his prepared remarks was available. “China has a huge customer base. In 2007, China’s total auto sales exceeded 8.8 million, with a 22 percent increase from 2006.”
With all of the competition in China – both domestic and foreign, including Volkswagen, General Motors, Toyota, Ford, Nissan, and Honda – Li said Changfeng had to market its vehicles globally and “prove ourselves as a true global player.”
Changfeng dates its founding back to 1950 when it was formerly the 7319 Factory of the People’s Liberation Army of China. The current company, which is “under the administration of the Hunan provincial government” was established in October 1996 and has 11 subsidiaries and more than 6,3000 employees, according to company literature. In context, Changfeng’s workforce is less than the employment at the Ford Motor Company’s famed Rouge Center in Dearborn, Mich., where the F-150 pickup is produced.
The company’s literature says that by 2010, it wants to have the capacity to build 288,000 vehicles annually, which seems highly ambitious when compared to its current sales. According to statistics supplied by J.D. Power and Associates, Changfeng made 17,609 vehicles in 2006 and was on track to sell a little more than 18,300 units by the third-quarter of 2007 and would rank 31st on the list of vehicle manufacturers.
The car company, however, has signed a contract to export 10,000 of its Leopard and Feiteng autos to Vietnam and is establishing sales channels to Russia and Eastern Europe.
The Kylin is listed as being a multi-purpose vehicle (MVP), though it is more of a small vehicle similar in size to a 5-door Ford Focus. Powered by a 1.5-liter Mitsubishi 4G18S engine, a fuel-injection system provided by the German-based supplier Bosch, and a Lotus-tuned chassis, the vehicle can sit four people. Its modern exterior was designed by the Pininfarina Company of Italy.
The five-passenger Liebao CS7 SUV incorporates more modern technology, including a “safe environmentally friendly, low fuel-consumption engine” which is a 2-liter inline, four-cylinder motor, Li said. Adding that both the Kylin and CS7 would be seen during the 2008 Summer Olympics in Beijing.
Also on display at the Changfeng stand was the recently launched Liebao CS6 SUV, which offered a contrast of fit and finish and quality issues, harkening back to mid- to lower-range vehicles of the 1980s. Whereas the CS7 had crisper, tighter lines, one could slide one’s hand between the trunk hatch and the vehicle frame along with cruder welds in some spots. Unlike a 1980s car, the Chinese SUV on display had LCD screens mounted in the front headrests, offering rear seat entertainment.
Equipped with either a diesel or gasoline engine, the company’s literature touts the CS6 as having all-wheel-drive and Michelin tires so it “can drive fast even on bumpy roads… There are no roads on which the CS6 cannot go.”
Return of Geely
Also drawing throngs of journalists was Geely, which was the first Chinese automaker to display cars when it showcased a car at the 2006 NAIAS. Skipping last year’s show in Detroit, Geely returned with six models including a taxi and several sedans. Its models have names such as the MK (King Kong) hatchback, CK, the FC or Freedom Cruiser (which is similar to the model of the same name that was shown at the 2006 NAIAS), the China Dragon Coupe, the London Taxi (made as joint venture with the tiny British Manganese Bronze Holdings company), and the Hifun sedan (made by a Geely subsidiary called Shanghai Maple).
Geely is China’s first privately-owned automobile manufacturer. According to J.D. Power it ranks ninth in the domestic China market selling about 200,000 units in 2007. Li has been quoted as saying that by the mid-2010s, he expects his company will be producing 2 million vehicles annually, with about “half for export.”
Instead of grandiose production estimates, for the 2008 Detroit Show, Geely introduced a new technology that it purports will make tire blowouts safer (a situation which modern tire technology has already eased).
Called the BMBS (Blowout Monitoring and Braking System), Geely Chairman Li Shufu played a video showing a test of the technology.
“Most people don’t believe that Chinese (auto companies) are doing technological innovations,” Geely’s chairman said, responding to a question about why the company debuted the BMBS technology in Detroit. Another reason for showing the BMBS video, he explained through an interpreter, was that the Detroit show is “one of the biggest (industry) events worldwide, and information can be transferred around the world and be understood by researchers around the world.”
Geely’s BMBS uses real-time monitoring of tire pressure and begins braking to allow the vehicle to continue it the direction the driver is trying to steer while gradually reducing speed. The technology has been mounted on police vehicles and fleet vehicles in China.
Li Shufu also announced that Geely was working on 15 new models that would be unveiled within the next three to five years with seven engine platforms including three- and four-cylinder motors, a V6, and a diesel engine capable of meeting Euro 5 environmental standards.
Regarding Geely’s plans for exporting to the U.S., its chairman said, “We’re not sure when Americans are welcoming to us to be here. When they welcome us, we’ll come.”
Another Geely spokesman added that the U.S. market was “tough” and the auto company didn’t expect to enter it “anytime soon.”
Geely’s vehicles sell in China for approximately $6,000-$60,000 U.S. The company has four manufacturing plants in China with two plants in foreign countries and four more planed for abroad.
BYD’s Electric Car
Known as the world’s largest cell phone battery manufacturer – controlling an estimated 25 percent of the market – BYD presented hybrid car called the F6DM to throngs of journalists along with three other conventional gasoline-powered cars.
As a battery manufacturer, BYD started in 1995 with 20 employees and had grown to 100,000 employees. It entered the automotive industry in 2003 with the purchase of the Tsinchaun Automobile Company. With two assembly plants, a research and development center, testing center, and mold plant, it has the capacity to produce 300,000 units annually.
According to J.D. Power, BYD ranks 19th in China with annual sales of 93,000 units in 2007, up from the 60,000 units in 2006. Its founder and chairman, Wang Chuanfu, has been quoted as saying that his company will be “number one (in China) by 2015” and the world’s leading automaker by 2025. Wang also has proposed using quick-charge cell phone battery technology to power cars.
The F6DM is what BYD calls a “dual mode” electric car, powered primarily by a ferrous (iron) battery, according to Michael Austin, vice president, BYD America Corp. It can run either as a pure electric vehicle or running on its small gasoline-fueled engine.
The company calls its car a EV + HEV (electric vehicle and hybrid electric vehicle), because it supposedly has a 60-80 mile range on electric power and can travel as far as 120 miles with its hybrid engine.
Ferrous batteries do not use heavy metals, but have a high energy density and can be easily recycled, Austin said. The F6DM could be recharged in nine hours by being plugged into a normal American standard 110-volt outlet or in 10 minutes at a special charging station.
“We have been studying electric vehicles and believe we have invented a breakthrough,” Austin continued.
“By the end of 2008, we will have small-scale production and sales in China of the F6DM,” Wang said. “We will especially develop a new energy vehicle for North America within three to five years, and we hope to share our technology with American consumers.”
Along with the F6DM, BYD displayed its conventionally-powered F3 family sedan and the F3R (a smaller, sportier hatchback), and the more luxurious looking F8 with a hydraulically-controlled convertible hardtop and hardened glass roof.
Chamco and Li Shi Guang Ming Auto Design
Chamco Auto (the Chinese America Cooperative Automotive Inc.) showcased an SUV and a pickup truck at the Detroit auto show, but did not hold a press conference. According to its press literature, Chamco plans to be the first Chinese company to import Chinese-made vehicle into the United States, Canada, and Mexico in late 2008 with a base MSRP (manufacturers suggested retail price) starting at $13,500.
There is a redesign and certification project to make sure that Chamco’s vehicles meet North American standards. The vehicle certification process “is the direction of automotive icon Steve Saleen, the company’s literature noted.
A former racecar driver and inductee in the Mustang Hall of Fame, Saleen founded Saleen Inc., which manufactures high-performance vehicles for the race track and street. In 1984, his company produced the first limited edition Saleen Mustang that one the 24-hour race at Mosport Park, Ontario, Canada. In 2003, Ford chose Saleen Inc. to be one of the key suppliers for the Ford GT supercar.
The five-passenger Chamco SUV on display at the auto show had a 2.7-liter, inline four-cylinder engine that produces 150 horsepower at 4,400 rpms and 180 ft. lbs. of torque at 3,200 rpm. Gas mileage figures were unavailable for the 3,916 pound vehicle, but it has a 19.2 gallon tank. Some of the standard equipment will include a five-speed manual transmission (a four-speed automatic transmission is an option), powered windows and side mirrors. CD/AM/FM stereo radio, front disc and rear drum brakes, and an anti-lock braking system (ABS).
Chamco’s four-door, 3,542-pound pickup truck will have a similar engine and handling features as the SUV. Sitting five passengers, its optional equipment would include a bed liner, light bar, backup radar, and 17-inch alloy wheels. A compact pickup, roughly the size of a Ford Ranger, it’s doubtful that Chamco will brag about whether the truck bed will fit a sheet of plywood lying flat, which seems to be a standard mentioned by many full-size pickup builders including GM, Ford, Dodge, Toyota, and Nissan.
The Li Shi Guang Ming Auto Design also showcased three small electric-powered vehicles. (If the design original Ford Taurus was the “jelly bean” car, the yellow vehicles could be dubbed the “potato” cars). Based in Beijing and owned by Li Guangming, the cars had the names such as Strip of Cloud, the Book of Songs, and the Detroit Fish.
The two-seat Strip of Cloud is mean for use at tourist locations or large residential communities – a market reached by Chrysler’s GEM (Global Electric Motors) low-speed, battery powered vehicle or golf carts. Reaching speeds of 26 miles per hour, it can be powered by either a lithium battery (for a total cost of $7,200) or a lead-acid battery pack (and a $3,800 price tag).
The Book of Songs is an enclosed, two-seater while the Detroit Fish (resembling a potato or a squat, yellow-version of the Oscar Meyer Weinermobile) is a five-seater that is supposed to be amphibious with two fins on each side. The Detroit Fish made its world debut at the 2008 NAIAS.
Market Barriers to the Chinese
“Here is a difference from when the Japanese and Koreans came in that a lot of people miss,” noted AutoNation’s Jackson, who formerly was the president and CEO of Mercedes-Benz USA. “The standards in the marketplace today are (tremendously more stringent) for clean air and fuel efficiency. More importantly, customer expectations have greatly grown. If you bring a questionable vehicle into the U.S. that’s new, but cheap, I think the American consumer is going to buy a used vehicle that doesn’t have these issues around it at the same price point.”
New cars that sell for $8,000 will find customers, but Jackson said that he is worried about the longevity of many of the Chinese auto manufacturers because they don’t have any global scale.
“All of these Chinese manufacturers are mom-and-pop companies. Every little town has its own car factory. There’s no scale. It’s massively inefficient and because they have no labor costs, they can knock out these cheap cars that are polluting and unsafe,” Jackson said. “Why did the Japanese and Koreans ultimately build plants in the U.S.? Because the automobile is one of the most technologically sophisticated products to produce. You need an infrastructure and a skilled level of labor to build them.”
China’s passenger car manufacturing industry is relatively young, dating back only two decades and there has yet to be a major shakeout and consolidation of many of the small vehicle companies.
By rough comparison to the young auto industry in the United States, between 1893 when the Duryea brothers made their first gasoline-powered horseless carriage in Springfield, Mass., and the mid-1920s, some 1,900 automobile companies had entered the American car industry. Only 35 had survived by the onset of the Great Depression, which winnowed the number down to “the Big Three” and a handful of other companies that included Hudson, Studebaker, Packard, and Willys-Overland (the creator of the “Jeep” brand).
Key differences between the Chinese auto industry and America of the early 1900s are, of course, a global industry, developed manufacturing and road building standards, and intense foreign-owned competition. It should be a safe bet that even when Chinese automakers enter the U.S. market, not all will survive left to their own devices. Of course, many of the Chinese companies are owned or controlled by elements of the Chinese national, provincial, or municipal governments. Whether these government entities have the financial wherewithal to “foot the bill” and remain viable entities in the car industry remains to be seen.
The type of Chinese-made vehicle that Jackson would sell is one from Chery, which is China’s largest domestic brand (and owned by the Chinese central government). Chery is working with Chrysler to manufacture a vehicle that will be badged as a Chrysler before 2010.
“I’ll be happy to sell (a Chrysler-badged Chery vehicle) because I know that Chrysler Corporation knows what the U.S. market needs and is there to stand behind it,” Jackson said.
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