China Takes the American Road

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The New York Sun

The sayings of Chairman Mao don’t resonate as they once did, though one Chinese automaker is touting its connection to him. Hunan-based Changfeng Motors Group is operating a small exhibit at the North American International Auto Show in Detroit, which started on Saturday, and in a promotional video it notes that the company is based in the same part of China where Mao was born and raised.

The state-owned company makes this link to Mao in order to arouse the interest of Western audiences. This only shows how much Changfeng still has to learn about the West, where historians blame Mao for the deaths of millions of Chinese.

Speaking in Detroit last week, Li Jianxin, the chairman of Changfeng, discussed his company and its plans in mostly incomprehensible English. The English narration of the company’s video, produced in the style of Cold War propaganda, was easier to understand and thus more intriguing.

But to conclude from Mr. Li’s presentation that China is years away from exporting cars to the West would be a mistake. The Chinese industry — though maybe not Changfeng — is on the brink and needs only to learn more about how the West distributes, markets, and services vehicles. That won’t take long.

The vehicle models that Changfeng exhibited at the show appeared roughly par with vehicles sold in America in the 1980s. The company’s display was relegated to the Cobo Center’s basement, where the world auto industry is showing off its latest models and newest technologies.

Having bought technology and designs from Japan’s Mitsubishi Motors Corp., Changfeng — which once specialized in repairing vehicles for the People’s Liberation Army — now builds a version of the Mitsubishi Pajero sport-utility vehicle, as well as its Liebao “Cheetah” CS6 SUV and a few other models.

Western consultants soon will explain to Mr. Li that Mao’s image won’t help sell cars to non-Chinese. Changfeng surely will hire a slick ad agency, buy more Western engineering technology, and provide translations for Mr. Li’s speeches. The vehicles will improve rapidly.

Changfeng says it wants to hire American dealers and begin selling cars by 2008, a timetable that sounds ambitious.

Having built fewer than 50,000 passenger cars in 2006, Changfeng isn’t even one of China’s 10-largest automakers. The biggest is Shanghai General Motors Co., a joint venture between Shanghai Automotive Co. and General Motors, which built 365,400 vehicles last year and could begin exporting to America tomorrow if it so chooses. GM already manufactures engines in China that are installed in Chevrolet Equinox SUVs.

So far GM and other automakers have been wary of importing Chinese-made vehicles to North America. Consumer demand for vehicles is growing in China, and automakers fear riling labor unions or undercutting their North American plants — neither of which are worries for Changfeng.

On December 29, DaimlerChrysler AG said it reached a preliminary agreement with Chery Automobile Co., based in China’s Anhui province, to build a subcompact car in China that will be sold by Chrysler Group in America. Chery built about 272,000 cars in China last year and is exporting to Russia, Indonesia, and a few African countries.

“Chinese companies are going to have a difficult time competing globally without a significant injection of key intellectual property,” said the chairman of the Center for Automotive Research in Ann Arbor, Mich., David Cole. “In this case, Chery will get help meeting U.S. emissions and safety standards, which are far more stringent than has been the case in China.”

Chery had been working with American investor Malcolm Bricklin to develop vehicles for the American market until that partnership ended in November.

With sales of subcompact cars like the Toyota Yaris and Honda Fit growing in America, Chrysler — which has no subcompact entry — has little choice but to seek help from a low-cost manufacturer. In Hunan, autoworkers earn about $300 a month, compared to about $4,800 for members of the United Auto Workers union.

Longer-term, the emissions, safety, marketing, and other technical knowledge that Chery gains in this venture likely will be used to develop export models to America under its own brand.

The Chinese government has been shrewd to insist that GM, DaimlerChrysler, and others that wanted to sell cars in China form manufacturing partnerships with Chinese companies.

“I think you may see Chinese cars first in Europe, where the small-car sector is much bigger than in the U.S., before you see them here,” said a partner in the Troy, Mich., office of Roland Berger Strategy Consultants Gmbh, Erkut Uludag.

As such, Changfeng might have a better chance in Europe. But Mr. Li knows that success in America also translates into more prestige at home. Or as Frank Sinatra would have explained to Mao: “If I can make it there, I’ll make it anywhere.”

Mr. Levin is a columnist for Bloomberg News.


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