January 15, 2013
The Detroit auto show, which kicked off on Monday, has proven since the mid-2000s more a revolving door for China's indigenous automakers with ambitions to sell cars in the United States.
For China's Zhejiang Geely Holding Group Co, which exhibited cars in 2006 at the North American International Auto Show in Detroit, and for others like battery and car producer BYD Co that followed suit, selling cars to American private consumers has proven a pipe dream.
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This year, as Geely and BYD and others stay away from Detroit, it is Guangzhou Automobile Group Co or GAC Motor's turn. GAC Motor is one of China's several state-owned automotive enterprises and runs manufacturing and sales joint ventures with Toyota Motor Corp, Honda Motor Co and Fiat SpA.
It is the first time for the company, based in the Southern China industrial city of Guangzhou, to take part in the Detroit auto show.
GAC Motor exhibited several "newly developed" cars, including three green vehicles: a four-wheel-drive hybrid sedan called Trumpchi which is ready for mass production; an electric SUV "prototype" dubbed Trumpchi GS5; and range-extended electric hybrid E-jet, a concept car.
"These masterpieces are all energy-saving and new energy vehicles," GAC Motor said on its website. They represent "the company's consistent philosophy of ‘Making Fine Cars' and ‘Detailing—Greatness,' as well as its favorable attitude toward vehicle electrifications, which make GAC Group differ from the previous Chinese exhibitors."
GAC Motor executives did not respond to questions by Reuters on whether the company harbors ambitions to sell cars in advanced markets such as the United States and Canada, but some indigenous Chinese automakers are getting close, some experts and industry insiders said.
At the least, they believe those Chinese automakers are closing the quality gap rapidly enough that they might in five years or so become theoretically ready to start thinking about selling cars in the U.S. and other mature auto markets.
One such analyst is Jacob George of consulting firm J.D. Power and Associates.
J.D. Power's analysis, according to George, shows that the "initial" quality of cars engineered and built by China's indigenous automakers is likely to be on par with levels achieved by their U.S., European, South Korean and Japanese peers by 2018. Initial quality refers to the quality of new vehicles that carmakers are able to achieve and is measured by J.D. Power by surveying a large sample of new cars buyers in key markets around the world.
That means, George said, Chinese automakers should be able to start thinking seriously about selling cars in the West toward the end of this decade.
But only theoretically, warned the J.D. Power analyst.
That's because an automaker needs more than just appropriate initial vehicle quality to be able to sell cars in a mature market like the U.S., he said.
"By 2018, we do see Chinese automakers becoming roughly equal in quality to global automakers, but in terms of actually selling the vehicle and in terms of actually appealing to the masses, you need to have more than just quality," George said.
They would need to develop consumer trust for the car and its brand and also make sure the car doesn't break down in the longer term, he said, referring to the longer-term product reliability and durability.
Realistically, those Chinese automakers like GAC Motor would not likely be ready to sell cars in the U.S. or other advanced markets until in the early 2020s, the Shanghai-based consultant said.
Still, many Chinese automakers are becoming more capable of producing decent cars, having become good enough to be able to sell about one million low-cost no-frills cars annually outside China -- mostly in emerging economies, from Egypt to Indonesia to Ukraine.
In China, all cars built by domestic Chinese automakers, whose initial quality is measured by J.D. Power, are below industry average, according to the company. But companies such as Geely and BYD are closing the gap rapidly and are almost near industry average, George said.
It was not immediately clear how close GAC Motor cars are to industry average in China.
By Norihiko Shirouzu, Reuters