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Can A Chinese Automaker Succeed In The United States?

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Guangzhou Automobile Group is latest Chinese company with U.S. ambitions

http://o.aolcdn.com/os/autos/article/aoloriginal-sm.gifPosted: Jan 15, 2013 | By: Pete Bigelow | AOL Autos

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http://o.aolcdn.com/os/autos/photos/...zhou-612pb.jpgGuangzhou Automobile Group was the first Chinese automaker in several years to display its cars during the North American International Auto Show in Detroit. (Photo by Pete Bigelow).

by: Peter Bigelow

China ranks as the largest producer of automobiles in the world. The United States has long been one of the world's most welcoming markets.

This would seemingly be an ideal match.

In reality, the Chinese companies that collectively built more than 19 million vehicles last year have been notably absent among the Asian imports that populate U.S. showrooms. Plenty have declared their intent to sell cars in the U.S., but so far none have figured out how to make it work. Despite several false starts, they just keep trying.

Guangzhou Automobile Group, China's sixth-largest automaker by sales volume, said this week it wanted to expand exports to developed markets as global growth accelerated. Industry analysts said that could include efforts to tap into the U.S. market, perhaps as early as 2015.

It was no coincidence, then, the company was making its first-ever appearance in Detroit at the North American International Auto Show, annually one of the world's signature automotive showcases, at which it announced a partnership with Chrysler to build Jeeps in China.

Plans are tentative for the arrival of Guangzhou, owned by the government-backed GAC group, in the U.S. But if and when the company's plans materialize, expect the automaker to focus on selling hybrid and electric cars. But first, the automaker must solve some of the simple problems that have dashed other Chinese companies hopes of reaching the U.S.

Starting in 2007, Chinese companies Changfeng, Geely, BYD and Li Shi Guangming have come to the Detroit Auto Show with similar ambitions. Regulatory hurdles, complications with establishing dealership networks and product quality have all played a role in China's slugging start here.

"Any new brand that enters a new market is going to face difficulty building momentum and overcoming the perceived quality issues," said Eric Lyman, senior analyst for ALG.

<input name="plr_ctgy_updt" value="Fuel Efficients" type="hidden">Cultural barriers also present a challenge. Guangzhou's press conference Tuesday was, well, a little stilted. An emcee spoke in clipped, broken English and rushed through a series of introductions of company executives before a video was shown. Afterward, the spokesperson announced, "Now is the time we memorize the event with picture." Executives quickly assembled for a snapshot and the press conference abruptly ended.

Likewise, as Autoblog noted, the spec sheets for the two production cars contained a few awkward -- in some cases, undecipherable -- phrases like "lamp of sleeve," "portable ashtray" and "Tweeter & Sackbut." Also, wheels for the cars were listed under optional equipment.

Barriers aside, the temptation of the U.S. market is hard to resist. Exports are a huge growth area for Chinese automakers, who exported 1.06 million vehicles last year, an increase of 29.7 percent over 2011, according to the China Association of Automobile Manufacturers.

Guangzhou believes alternate-powertrain vehicles offer a better entry point to the developed U.S. market than conventional gas-powered cars. Toward that end, three "New Energy" cars were on display in the lobby of the Cobo Center, two sedans and a crossover utility vehicle that looked like typical American cars.

They included the Trumpchi, a four-wheel drive hybrid sedan that will enter the Chinese market in a matter of months, an electric CUV-style concept called the Trumpchi GS5 and an extended-range compact hybrid sedan, the E-Jet, which company officials say has an electric-only range of 62 miles.

A marketing video shown by GAC on Tuesday showed the three cars rolling down a highway, with the Statue of Liberty and Brooklyn Bridge displayed prominently in the background.

Before dismissing Guangzhou's effort, Lyman warns skeptics the "Japanese and Korean automakers had to go through these same perceptions."

That they ultimately succeeded perhaps gives Guangzhou some hope. If there's reason to believe the carmaker might succeed where others have failed, it's its track record of collaboration. In the past, it has embarked on joint ventures with the likes of Honda, Toyota, Mitsubishi and, now, Chrysler.

If there's a reason to believe big aspirations will fade with the others, its that Chinese automakers have overlooked challenges before and Guangzhou proved no exception Tuesday.

Even something as simple as renting space at the Detroit Auto Show proved vexing – the company wound up with an area in the lobby rather than inside Cobo Hall with the other automakers.

"We underestimated the difficulties we'd have in booking a booth," a company spokesperson said.

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Gallery: 2013 guangzhou detroit
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