Made in China, Driven in USA
Wednesday, July 4, 2007
Chery Automobile, a feisty newcomer to global carmaking, is on the verge of becoming the first Chinese company to crack the U.S. auto market.
Yesterday, DaimlerChrysler said it finalized a deal with Chery and the Chinese government to export small cars made by Chery to United States and Western Europe. The deal, a broad framework for strategic cooperation, was signed today at a ceremony in Beijing. Chery cars will be sold under the Chrysler, Jeep or Dodge brand and are expected to go on sale in the next few years.
Essentially a state-owned enterprise with strong backing from local and central government, Chery was created in 1997 to help the economy of Wuhu, a city about 150 miles west of Shanghai. The company is viewed as a rebel in the Chinese auto industry. Chery constructed its first assembly line in secret, violating Chinese law. Its biggest competitive advantage is that it excels at manufacturing small, fuel-efficient vehicles at low cost.
Chery sold a little more than 300,000 cars last year -- roughly the output of one large U.S. assembly plant. But like other Chinese automakers, Chery has long dreamed of a big presence in the United States, the world's largest and most lucrative car market.
At the same time, the Chinese government has aggressively supported the expansion of its automakers. Its goal is for Chinese cars to make up 10 percent of the world's auto trade in the next decade.
Chery's efforts to break into the United States have proven troublesome. Two years ago, it announced that it had teamed with Malcolm Bricklin, a veteran auto entrepreneur, to sell 250,000 cars here by this year. The deal fell apart.
Chery's move to break into the U.S. market follows the successful efforts of a number of Japanese and South Korean automakers over the past three decades. After years of exporting cars for sale in the United States, those pioneers built auto plants throughout the country. From that base, their U.S. sales expanded sharply.
Chery will still manufacture its cars in China, but by tying itself to a partner with thousands of outlets in the United States, it might be taking a shortcut.
"There are lessons to be learned here for Chery," said Michael Robinet, an industry analyst at CSM Worldwide. "Rather than go it alone, they have a partner with thousands of dealers that would allow them to sell small vehicles very quickly."
Robinet said the partnership with Chrysler will give Chery a deeper understanding of North American manufacturing, experience dealing with U.S. suppliers and a greater understanding of fuel-efficiency technology. Down the road, as it plots a strategy for growth, Chery could launch its own brands or even buy manufacturing assets from Chrysler.
But how will cars exported from China rate with finicky American car buyers?
There was a time when Japan was synonymous with junk, said Maryanne Keller, a longtime industry analyst. Though that's no longer the case, it took 30 years for Japanese companies to become established as quality brands, she said. Hyundai cars, arriving in the 1980s from South Korea, also had trouble gaining traction because of problems with quality.