The dealers call impatiently from France, from Italy, from Moldova. They have heard that a Chinese-made automobile, the first to land in Europe, is a third cheaper than anything on the market. When will the ship arrive?
With each call, Peter Bijvelds swells with vindication. On this continent defined by BMW, Renault and Mercedes, he has bet that he can interest Europeans in the Landwind, a sport-utility vehicle made in China at a factory owned by the Communist Party government. The first 200 vehicles reached the Belgian port of Antwerp on July 4. He has already sold the lot, plus 100 more.
"You cannot compare it to a VW or a BMW," said Bijvelds, president of LWMC Ltd., Landwind's sole European distributor. "It doesn't have a high-power engine or the most modern suspension. But for the money, you get a hell of a lot of car."
The outcome of this venture could influence the global auto industry and China's role in the world economy. The Landwind is among the first in a wave of Chinese-made cars reaching Europe this summer, part of China's quest for overseas markets. The bid by the Chinese oil company CNOOC Ltd. to take over Unocal Corp. is the clearest sign of this "go out" strategy, but the migration of its own companies overseas is largely about bringing goods to new consumers: Chinese factories, long focused on churning out low-priced products, are seeking to become recognizable brands.
China's global reach has already reshaped the home appliances and electronics sectors. This year, Lenovo Group Ltd., closed its $1.75 billion deal to acquire International Business Machines Corp.'s personal computer business. The Chinese television manufacturer TCL Corp. purchased the French company Thomson, claiming the rights to the RCA logo. A consortium led by the Chinese home appliance giant Haier Group is pressing to buy Maytag Corp. TV maker Hisense and telecommunications equipment giant Huawei Technologies Co. are expanding aggressively with their own brands.
Now, the same trend is emerging in the auto industry. Last year, Chinese carmakers exported only about 100,000 vehicles, mainly to Southeast Asia, Africa and the Middle East, according to Frost & Sullivan China, a Beijing-based research firm. The foray into Europe is the first test of the world's richest markets by Chinese automakers. Last month, Honda loaded a ship near the southern city of Guangzhou with cars made at its factory there, sending them on to Germany and Italy. Brilliance China Automotive Holdings Ltd. plans to sell sedans in Germany this fall. Chery Automobile Co. Ltd. -- which has pioneered small sedans that sell in China for as little as $4,000 -- has announced plans to begin sales in the United States in 2007.
"I just look at the Chinese and I see how fast they are moving on the international scene," said automotive consultant Maryann N. Keller. "They're taking the Japanese plan for national development and compressing the time. The U.S. has historically provided the bulk of the earnings for pretty much every auto company in the world. I don't think there is any doubt that by 2012 we will see plenty of Chinese-made cars in the United States."
These developments are occurring as General Motors Corp. and Ford Motor Co. struggle with flat prices and diminishing profit. An hour of assembly line labor costs about $55 in Detroit and about $30 in Germany. In Poland, where General Motors has been shifting work, the average laborer earns less than $5 an hour. In China, wages are about $1.50 an hour.
But many experts are skeptical that Chinese companies can become major auto players in the United States and Europe. Car buying remains emotional terrain, and it could be difficult to persuade motorists to entrust their fate to a country often associated more with peasants on bicycles than four-wheel drive. For the typical American family, a car is the second-most expensive purchase it will make after a home. Some see car selection as a reflection of lifestyle and class.
"The kind of car you produce in China is not the kind of car you produce for the U.S.," said Dana Johnson, chief economist for Comerica Inc., in Ann Arbor, Mich. "I don't know if the Chinese can really overcome that. It's going to be a marginal entrance for the next several years at a minimum."
Automakers in Japan and Korea once overcame similar doubts. Some say China will, too.
For Chinese companies, the move abroad is driven by weakness more than strength, say analysts. A flood of credit has nurtured too many factories at home, resulting in more goods than China can absorb, pushing prices so low that few can profit.
This is particularly pronounced in the auto industry. China is home to more than 100 automakers with a collective capacity to produce about 6 million cars a year, according to the China Association of Automobile Manufacturers. Yet sales last year of Chinese-made cars totaled only 2.3 million, according to state media. An ongoing $25 billion expansion is expected to exacerbate the glut, nearly doubling existing capacity by 2007. Meanwhile, sales growth has slowed from 76 percent in 2003 -- fueled by easy credit terms that have produced many bad loans -- to 15 percent last year, according to state statistics. Prices have fallen between 5 and 14 percent every year since 2000, according to Frost & Sullivan. The popular VW Santana has dropped in price from about $21,000 in 2000 to less than $9,000 today.
"The Chinese government is pushing big Chinese manufacturers to build their own brands and penetrate new markets overseas," said Jia Xinguang, a senior analyst at the Beijing Institute for Automobile Industry Research. "Automakers have to go overseas to find markets for their overproduction."
Landwind is a piece of the Jiangling Motors Co. Group, a state-owned company set up in Nanchang in 1963 to repair trucks and buses. Recently, Jiangling has profited from the boom in passenger cars. Launched three years ago, the Landwind was among the first SUVs in China.
"We knew that in America SUVs were increasingly popular," said Liang Bo, director of marketing and sales at Jiangling Motors Import & Export Co. Ltd. "We figured that as living standards rose, people would want this kind of vehicle."
The Landwind was born like many Chinese products: Jiangling purchased all the SUV models it could, then took them apart and studied them. "Basically, we bought them all," Liang said.
In 2001, the company built a new factory, aided by tax breaks and cheap land from the local government. The next year, it made 200 SUVs: some front-wheel drive and some four-wheel. The following year, Landwind sold 2,800. This year's target is 21,000.
Despite that success, Landwind has been hurt by the national glut, chopping the price of its most popular vehicle to $20,000 from about $22,500. By late 2003, Liang was in the middle of researching export possibilities.
"We have to be stable and show very good performance in Europe, and then we will go to the United States," Liang said. "We want to be a global brand. It might take a long time, but we're starting now."
But how? Who would distribute the cars? How would they meet European emissions standards? Landwind lacked the technology to comply.
Bijvelds seems an unlikely vessel for China's hopes of entering the European market. Only 27, he was raised in this town of 6,000 in flat pasturelands some 60 miles south of Amsterdam. But his parents were car dealers, and recently he has run his own import-export company, bringing inexpensive Nissans to Holland from Italy.
His China venture began in April 2004, when a friend who had invested in a Chinese helicopter factory brought him along on a visit to see the Landwind factory in Nanchang, a poor and gritty city just south of the Yangtze River in the Jiangxi province. Bijvelds liked what he saw, a tidy factory of 1,000 workers with the capacity to make 50,000 vehicles a year. Its production line included robotics from Japan, assembly equipment from Britain and a paint system from Germany. "It was very clean and efficient," he said.
When he drove the vehicle, he was impressed. Big and boxy, it did not corner like a sports car nor accelerate with power. But for Europeans wanting to tow a boat or looking for a roomy vehicle, this car could challenge Korean models such as the Hyundai Tucson and the Kia Sorrento. It had air conditioning, electronic controls and aluminum wheels -- and it was relatively fuel efficient.
Bijvelds shipped two sample models to Europe and hired engineers to work on making them emissions compliant. Three months and $1.8 million in investment later, he had the fix: the addition of about $350 worth of gear.
In March, Bijvelds became Landwind's sole distributor in the European Union's 25 countries, plus Switzerland. He has since ordered 600 vehicles.
Neither Bijvelds nor Jiangling officials will disclose the price he pays, but the retail base price is about $20,400. That includes 64 percent in taxes payable to the Dutch government. The closest competitors, Hyundai and Kia, sell in Europe for at least $33,000.
Bijvelds plans a slow roll-out. He picked the Netherlands first because there is no domestic competitor. He plans to open 10 dealerships in Belgium in August and is exploring the German market as well. He says he will easily sell 3,000 cars this year.
Bijvelds has spent nothing on marketing. News spreads by word of mouth, as a stream of customers appears here, to the first and only dealership.
"It's a nice-looking car, a lot of space and a really good price," said Peter Karel, 58, as he signed the papers to buy a 2.8-liter diesel model for about $25,000 -- less than half the price of a Nissan he had considered. As for the vehicle's national origin, Karel shrugged. "When Nissan first came to Europe, people said, 'Well, it's a Japanese car and we don't know what that is,' but it's worked out well," he said. "If it's a good ride, then fine."
Special correspondent Jason Cai contributed to this report.
Peter Bijvelds is betting he can sell the Chinese-made Landwind SUV to Europeans. He plans to open 10 dealerships in Belgium next month and is exploring the German market.