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The Chinese are coming-Local car dealers are curious, but in no rush to commit

There has been much discussion in recent months about the impending entry of Chinese automakers in the U.S. market.

And some Louisville dealers have had conversations with representatives of Chinese automakers. Story continues below ↓ advertisement

But how soon will it be before Chinese automobiles begin appearing on Louisville streets?

"There's no doubt they're coming," said Les Albro, president of Bales Motor Co. Inc. in Jeffersonville. "We've gotten letters from some of them, but it's too early to make any kind of a decision" about partnering with them.

First models could be in country by late 2008

In January, upstart Geely Automobile Co. of Hangzhou, China, displayed its modest 7151 CK five-passenger sedan at the North American International Auto Show in Detroit.

Last week, John Harmer, vice president and chief operating officer of Geely-USA (pronounced "jee-lee") told a gathering of the Society of Automotive Analysts in Detroit that the company plans to introduce the $8,500, four-cylinder car in the United States as early as the fall of 2008, Xinhua News Agency reported Monday.

Bob Hook Jr., owner and president of Bob Hook Chevrolet in Louisville and Bob Hook Buick, Pontiac, GMC in Shelbyville, said he checked out the Geely display at the Detroit auto show and gave a business card to a Geely representative, but he has not heard back from the company.

"I don't think their program is quite up to snuff yet," Hook said of Geely. "For now, I'm just going to keep plugging away selling my Chevys, Pontiacs, Buicks, GMCs and commercial vehicles."

But Hook said he suspects many dealers who lament not signing on with Honda, Toyota and Nissan when those automakers entered the U.S. market will feel compelled to sell Chinese vehicles.

"Many of those dealers might fear missing out on the next big thing," Hook said. "I think the new companies will play on that fear a little bit."

Other Chinese competitors on the horizon

Malcolm Bricklin, the man credited with bringing the Subaru and the Yugo to America, has been involved in a well-publicized effort to bring another manufacturer, Wuhu, China-based Chery Automobile Co., to the United States by the end of 2007.

Bricklin, 66, plans to introduce five models: a sedan, a hardtop convertible, a crossover vehicle, a minivan and a sport utility vehicle.

The vehicles are being designed by Italy-based Pininfarina SpA and Bertone Group, and engines are being designed by Austrian engine design firm AVL List GmbH.

Pininfarina has done design work in the past for at least two dozen manufacturers, including Jaguar, Ferrari and Maserati. Bertone has developed designs for Alfa Romeo and Lamborghini.

Bricklin's company, Visionary Vehicles LLC, has yet to establish a dealer network or preview one of Chery's vehicles in the United States.

He said he has signed 42 dealers, but none are in Kentucky.

But that could change in the coming months as a key agreement is put in place.

Bricklin said Atlantic-Pacific Capital Inc., a firm that raises capital for direct private placement, has agreed to loan Visionary Vehicles the $225 million it needs to form a joint venture with Chery.

Visionary will sign a deal within the next two weeks to purchase a 40 percent stake in Chery, Bricklin said.

Soon thereafter, the company's modern, 9 million-square-foot, 9,000-employee factory could increase production to serve the U.S. market.

Bricklin said the factory, which produced its first cars in 2001, made 90,000 in 2004 and 190,000 in 2005. It is slated to make 350,000 this year, and Bricklin said he hopes that will increase to 750,000 by 2011.

"Once the dealers see us make that commitment, I think more of them will step up to the plate," Bricklin said.

Bricklin is asking would-be dealers to invest $2 million per market up front to help fund Chery's U.S. launch, said Dick Swope, president of Swope Auto Group, Louisville's largest new car dealer by sales volume.

A news release issued a year ago by Visionary Vehicles said that each dealer would be required to invest a total of $10 million to $15 million for exclusive distribution rights, acquisition of an equity portion in Visionary Vehicles LLC, the purchase of land and construction of a gallery-like showroom facility called an "Auto Shows" dealership.

But after talking with dealers, Bricklin said he was convinced that he needed to scale those plans back and seek just the $2 million initially. "The dealers told me that if I required them to do it, I would put them all out of business," Bricklin said. "I figure that they can build a stand-alone dealership and get some volume, and then we can talk about the Auto Shows concept in a few years."

Swope said he has talked with Visionary Vehicles representatives about their plans.

"It's interesting, but it's also a very risky venture," Swope said, adding that he is doubtful that any Chinese automaker will be able to bring a vehicle to market in the United States by the end of 2008. "We've seen the photos of the cars, and they are very attractive. But at this point, they are just photos."

Swope, whose company already sells Toyota, Scion, Honda, Suzuki and Mitsubishi, said he isn't ready to make a commitment to another manufacturer. In addition to those Asian brands, Swope Auto Group also sells BMW, Buick, Cadillac, GMC, Infiniti, Lexus, Pontiac, Saturn and Volvo.

"We haven't decided one way or another on Visionary Vehicles," Swope said. "I don't know if there is a right or wrong decision at this point."

Companies face challenges

Vehicles in development by the Chinese automakers still must meet U.S. government standards for crash safety and emissions. The Chinese government also must approve the vehicles for export to America, Swope said.

Bricklin said he expects Chery to begin submitting vehicles for emissions and safety certification by the end of the year.

Michael Dawson, the Troy, Mich.-based manager of global forecasting analysis for J.D. Power and Associates, predicted that Chinese companies won't begin selling vehicles in the United States until late 2008 or early 2009.

"The two biggest hurdles they have to cross are getting the quality of vehicles up to consumer standards and establishing a dealer network," Dawson said. "The end of 2008 is still a long way off, so I think that is realistic."

Finding the right market

Swope said Chery's vehicles are different from Geely's because they are mid-sized luxury sedans aimed at a more affluent buyer than the no-frills Geely model.

Bricklin said the Chery vehicles should be compared with Audi, BMW and Lexus, but should sell for $25,000 or less, compared with $35,000 or more for the European vehicles.

But Dawson said that comparison might be too lofty for a company without a track record like those of its European competitors.

"That'll be a tough act to pull off," Dawson said. "That's not to say that it's not possible, but if you look at a company like Hyundai, they've been around for quite some time, and it really hasn't been until the past three to five years that they have built more sales volume."

Albro, who has operated a Hyundai dealership since 1991, said the decision to stick with the brand was difficult at times because of quality problems and low sales.

"From 1991 to 1999, we didn't sell enough to make it profitable for us, and there were many times I thought about dropping Hyundai," Albro said. "But the turnaround from 1999 to today is, by far, the greatest turnaround I've seen in my 46 years in the business. Now I'm really glad we decided to stick with them."

But he said he was unsure whether he'd do it all over again with another Asian unknown.

While Harmer and Bricklin battle to become the first to bring their respective Chinese autos to U.S. showrooms, other Chinese companies, such as Great Wall Motor Co. Ltd. and Hebei Zhongxing Automobile, are considering exporting vehicles to the United States, the Detroit Free Press reported.

"There's no doubt that there soon will be a Chinese automaker selling cars in the U.S., and all automakers currently in the U.S. have to look at it for what it is," said Brian Chee, managing editor of Autobytel.com. "It is going to take sales away from them."

Bricklin ready to take on U.S. auto industry once more

Malcolm Bricklin has spent his fair share of time in the penthouse and the outhouse of the American automobile industry.

The eccentric 66-year-old automobile industry executive founded Subaru of America in 1968. The company, which was sold in the 1990s to Fuji Heavy Industries, continues to thrive.

Other ventures didn't turn out so well.

In 1974, he founded Bricklin Motors in Canada and began a two-year stint building a "safe" sports car, the "Bricklin SV-1."

Complete with Fiberglas body, air bags, roll cages and side guardrails, the gull-winged Bricklin never fully took flight, selling only 2,875 units before Bricklin Motors ceased production in 1975.

Bricklin's next risky venture came in 1985, when he created Yugo of America to import the notorious Yugoslavian economy car into the United States.

About 160,000 Yugos, which retailed for $3,995, were sold in the United States before Bricklin sold his interest in 1988, prior to NATO strikes on the country.

The pint-sized compact was the punch line of many jokes because it lacked power and panache.

But many of those same Yugo dealers are lining up to sell Chery Automobile Co. vehicles because they believe Bricklin can find value in the Chinese cars, he said.

"The Yugo was a great money maker for many of the dealers."

Starting over

For more than a decade after exiting the Yugo venture, Bricklin had been content selling imported Italian sports cars and creating electric-powered vehicles and automotive fuel cells. But an unexpected phone call a couple of years ago from a U.S. government official in Serbia, part of the former Yugoslavia, re-ignited his desire to make affordable vehicles overseas and import them into the United States.

"They were looking for ways to use an old factory that still had five NATO missiles in it," Bricklin said. "I decided against that, but it led me on a search to a number of other countries to find opportunities."

Bricklin found the opportunity he had been seeking when he met executives with Chery Automobile Co. The company has 9,000 employees, including 800 engineers, who work in modern facilities in Wuhu, China.

He founded Visionary Vehicles LLC, a New York City-based company, to form a joint venture with Chery. In the coming weeks, it will close on a deal to buy a 40 percent stake in the automaker for $225 million. "I knew I was home when I met the Chery folks," Bricklin said. "They were doing what I wanted to do before I recommended doing it.

"What I saw was a car company well funded, doing all the right things," Bricklin added. "It was the opposite of what we had with the Yugo."

Looking for luxury

What Chery was doing, Bricklin said, was selling European-style, Chinese-built luxury vehicles at a fraction of the price of their European competitors.

"I want to redefine the price of luxury," Bricklin said. "We want to be cheaper than a Camry or an Accord, but better than a BMW or an Audi."

Bricklin said he realizes that some automobile dealers and consumers might have reservations about the quality of Chinese-made automobiles.

But once they see the product, he believes they will be convinced.

"These vehicles have real engineering behind them," Bricklin said. "China is at a point where they're building rockets and jets. They're past the garbage-building stage."

Some industry analysts and insiders are skeptical about Bricklin's aggressive approach toward bringing Chinese vehicles to the United States.

But Bricklin relishes the challenge. He predicts that Chery will produce 750,000 cars within five years and that 250 U.S. dealers will sign on.

And he's documenting every step along the way.

Bricklin has a camera crew filming his business dealings each day to document the development of the company. More than 800 hours have been shot so far.

Some of the footage is posted on his Web site, www.vvcars.com. It also might be shopped some day for a reality television program, he said.

"This is the most fun I've ever had with my clothes on," Bricklin said.

"I'm sure everybody wishes we didn't come," he said of those already competing in the U.S. auto industry. "But now that we're here, they're going to have to deal with it."

Polls show support for Chinese cars -- but also concerns

According to a series of unscientific online surveys conducted in January by Autobytel Inc., 55 percent of consumers polled at www.autobytel.com said they would not purchase a Chinese-made automobile, and 42 percent said they would "seriously" consider buying one.

Autobytel said an average of 630 people responded to each poll.

Autobytel Inc. is an Irvine, Calif.-based Internet automotive marketing services company. The company's Web site, www.autobytel.com, allows consumers to research, finance and purchase new and used vehicles.

"We see the onset of Chinese manufacturers in the U.S. market as a major development," said Autobytel managing editor Brian Chee.

"There is a strong level of interest among consumers," Chee added. "I think most people, though, are taking a wait-and-see attitude."

Seventy-three percent of the consumers who participated in the survey described their preconception of Chinese vehicles as negative, "possibly low quality, not very stylish or safe," Autobytel reported in a news release. The other 27 percent said they viewed Chinese vehicles as positive because they potentially are "inexpensive, interesting and cutting-edge," the release said.

In another survey, 55 percent of the respondents said they would not buy a Chinese vehicle in support of protecting American jobs. Another 31 percent said they would buy the vehicles as a means of supporting fair trade. The remaining 14 percent were undecided.

The Autobytel report said that when asked what would deter consumers from buying a Chinese automobile, 69 percent said they were concerned with resulting U.S. job losses and supporting a country they believe has a poor human rights record. Another 19 percent said quality concerns would keep them away from Chinese vehicles. The remaining 12 percent gave various reasons.

Of the factors that consumers said would convince them to buy a Chinese automobile, 40 percent said quality, safety and performance ratings were the most important. Another 28 percent said they would be most influenced by a "a great warranty," and 23 percent said the price was the most important selling point. The remaining 9 percent said styling was the key element that would sway their decision.

Of those who responded, 71 percent said they believed Chinese manufacturers will succeed in the United States market.

"People are going to be skeptical or stand-offish at first because they want to make sure the quality is there," Chee added. "Things like a 10-year warranty have gone a long way for companies like Kia because it shows consumers that the manufacturer stands behind the product."

www.msn.com March 26, 2006

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