Chinese Car Companies are Trying to Run Before They Can Walk

November 10, 2011 By Pei Zhang

Fueled by cheap financing and booming domestic demand, Chinese automakers have been growing rapidly at home. That has given them the confidence, though not necessarily the tools, to start selling to Americans.  For at least half a decade, Chinese manufacturers including Brilliance, Geely, Great Wall and BYD Auto said that they would start selling cars in the American market in the near future.  Very few, if not none, have yet materialized.

The Chinese auto companies need, among other things, good dealerships, which are substantial investments of time and resources.   Unfortunately, they thought that penetrating the U.S. market was just as easy as what they have accomplished at home.  The competition is ultra fierce and the margin is slim in the U.S.  The Chinese are trying to attack the market by selling more advanced hybrids and plug-ins.  Recently on October 24, BYD officially opened its new North America headquarters in LA, about a year behind schedule with fewer workers than first targeted.  BYD’s plan is to make its LA headquarters the center for the growing market for electric cars.  The delay reflects an electric-car market that hasn’t developed as rapidly as first expected.  Since the consumers are particularly cautious about electric vehicles and their driving ranges and batteries, they are more comfortable with established companies, such as G.M.  Thus, the Chinese are looking into buying competitors and then using their dealers to reach Americans.  One good example is Geely, which acquired Volvo last year.  Even then, Geely is expected to invest millions of dollars on marketing and hope American consumers are adventurous enough to try such a new brand.