DETROIT – Exhibiting Chinese automakers at this year’s North American International Auto Show (NAIAS) were invited to speak at a half-day seminar on January 15 in Detroit organized by China Business Update, publisher of the weekly newsletter, CBU-Auto and monthly magazine, China Automotive Review.
Top executives of five companies, namely, BYD Auto, Geely Group, Changfeng Motor, Chamco Auto (U.S. partner of Zhongxing Automobile) and Li Shi Guang Ming Automobile Design spoke at the seminar co-organized by auto.sohu.com and the Detroit Chinese Business Association. Also speaking at the seminar, which attracted 200 automotive executives and media representatives, were Jeffrey Owens, president of Delphi Electronics and Safety, independent auto analyst Glenn Mercer and Wayne Xing, publisher of CBU/CAR.
From Bring You Dollars to Build Your Dream
Four years ago when asked what BYD stood for at CBU’s 2004 Presidents’ Forum in Beijing, Wang Chuanfu, chairman and founder of the world’s largest mobile phone rechargeable battery maker, said: “Bring You Dollars”!
But today Wang has given BYD a brand new meaning: “Build Your Dream”! And that dream refers to his prototype of the F6DM sedan on display at NAIAS, a “dual mode” vehicle slated to be launched in China later this year.
Wang Chuanfu, the 42 year-old entrepreneur who started his battery business 13 years ago and automobile assembly business four five years ago, said that the dual mode electric vehicle would be the most practical alternative fuel vehicle in the near future.
Wang explained in a presentation at the seminar that the dual mode refers to both the electric vehicle (EV) mode and the hybrid electric vehicle (HEV) mode. It is also called plug-in hybrid vehicle (PHEV).
“The dual mode electric vehicle would be the future mainstream new energy vehicle,” Wang claimed, “in the transition from the conventional internal combustion engine to future pure electric vehicles.”
Although pure electric vehicles have the advantage of zero emission and high conversion efficiency of up to 90 percent, they must depend on an infra-structure of charging stations, according to Wang. An HEV, which has a fuel saving capacity of about 20 percent and therefore lower emissions, has the disadvantage of low efficiency and cannot be recharged using external power as with an EV.
In comparison, Wang said, a DM vehicle has better performance in terms of cutting CO2 emissions, energy efficiency and noise control than HEVs and also lower costs than EVs. But more importantly, a DM vehicle, similar to an HEV, can now be put into volume production. Wang believes that his DM vehicles would be ideal for consumers who spend 90 percent of the time commuting less than 60 miles per day in the EV mode but only 10 percent of the time traveling in excess of 60 miles in the HEV mode.
With the launch of the DM vehicles later this year in China and future popularization, Wang believes that his company would become the country’s No. 1 automaker by 2015. By exhibiting the DM vehicle at NAIAS, he expects to sell the same vehicles in North America in the next 3-5 years, possibly setting up local assembly plants.
Independent automobile designer Li Guangming reviewed the history of the Model T and the Volkswagen Beetle in his presentation and came to the conclusion that the future of the automobile in China and in the world points toward “without any doubt alternative fuel and electric vehicles.”
From Made in China to Developed in China
Selling vehicles into the world’s largest automobile market is not only BYD’s dream. It is the dream of all the five Chinese exhibitors this year as well as many others who are setting their eyes on exhibiting at future auto shows in Detroit.
In fact, for Geely and Changfeng, this is their second appearance in Detroit. Although Geely was absent in 2007, it came back this year with six vehicles instead of the lone model it showcased in 2006.
The Freedom Cruiser on display in 2006 failed to pass the U.S. safety and emission standards. But this year Geely appeared to be much more confident than in 2006. “Maybe it will take another 5 or 10 years or longer to catch up with others, but that day will for sure come,” said Frank Zhao, vice president of Geely Holding and president of Geely European and American Automotive Industrial Park.
The one lesson that Geely had learned from its first unsuccessful appearance in Detroit was that low cost alone would not make its vehicles sell in North America. For local Chinese brands to be successful, Zhao said at the seminar, Chinese automakers must focus on R&D so as to develop vehicles not only with low cost, but also with high quality and core technology.
A former senior R&D executive at Chrysler, Zhao returned to China in 2004 to join Brilliance Jinbei and led its efforts in developing the company’s follow-up models of the independent Zhonghua sedan before moving to private automaker Geely to head its R&D efforts.
Geely Holding, China’s largest private carmaker plans to operate a total of nine assembly plants in China by 2009 and six plants overseas. It expects to build an annual manufacturing capacity of 1.7 million units by 2015.
Zhao told the seminar that based on Geely’s efforts in R&D, the company today has eight vehicle platforms that can derive up to 42 models, seven engine platforms that can derive up to 23 engines and eight transmission platforms that can derive up to 17 transmissions.
Geely also claims to have developed several of its own proprietary key technologies over the years, which include the CVVT engine technology, CVT, 6AT and 6DCT gear boxes, electro-equal-balance HEV technology, the advanced BMBS system, EPS system, etc.
Geely not only boasts a team of 1,400 engineers but also owns four universities and China’s first private graduate school.
To Frank Zhao, the development of Chinese local brands “is not a fantasy. In fact, it has taken us just less than 10 years to go through the phase of basic learning.” Zhao said that in the past five years, Chinese local automakers have achieved what the Japanese and Koreans were able to achieve in 20 years. Today Chinese local independent automakers are capable of transforming from “Made in China” to “Developed in China.”
Chinese SUVs to first arrive in the U.S.?
Also speaking at the seminar were the chairmen of Changfeng Motor based in Hunan Province and Chamco Auto, or China American Cooperative Automotive Co., Ltd., U.S. partner of Zhongxing Automobile based in Baoding, Hebei Province.
Both Changfeng and Zhongxing are eyeing the SUV and pickup truck markets in North America. In his presentation titled “Chinese Cars Are Coming to North America,” Chamco chairman Bill Pollack told the seminar that his company, which has an exclusive agreement with Zhongxing Automobile, “is on track to become the 1st U.S. importer of Chinese vehicles in 2008.”
Headquartered in Parsippany, New Jersey, Chamco’s mission is to build a bridge between Chinese manufacturers and the North American market, according to Pollack. Over the past three years since its founding, Chamco has been trying to invite dealers strategically positioned in North America as investor/partners in order to build a distribution network for imported Chinese vehicles.
By combining attractively priced, entry-level automobiles with cost-effective outsourcing operations and low corporate overhead, Pollack said that Chamco is well positioned to provide consumer value, strong dealer margins, manufacturer incentives and investor returns.
Changfeng Motor, an SUV manufacturer, has been exhibiting in Detroit for two consecutive years in an effort to crack open the North American market. Changfeng chairman Li Jianxin told the audience that by collaborating with partner Mitsubishi as well as relying on the company’s two R&D centers, Changfeng is developing SUVs, pickup trucks and MPVs for both the domestic and overseas markets. Li predicted that Changfeng would begin selling vehicles to the U.S. in 2009 as part of the company’s strategy to reach an annual production capacity of 300,000 vehicles by 2010.
Analysts believe that both Chamco and Changfeng face tough challenges ahead as they try to tap a mature North American SUV and pickup truck market. For Chamco and Zhongxing, the difficulties will be in homologation and completing its dealer network. For Changfeng, which is yet to find a partner in the U.S. the road ahead is even tougher despite the fact that its SUVs are in general of a higher quality than those made by Zhongxing.
Independent auto analyst Glenn Mercer, however, splashed some cold water to the enthusiasms enjoyed by Chinese companies who plan to enter the North American market. “There is no doubt Chinese cars will be coming to the U.S.A., in large numbers, in the next few years,” the former and long-term consultant at McKinsey & Company told the seminar. “There is also little doubt that one or more Chinese OEMs will find success in the US market. However, it is likely that some entrants will either fail or incur enormous losses, and that even the ‘winners’ may not deliver an adequate return in investment for many years.”
Mercer advised that all entering Chinese OEMs must, therefore, find a “distinctive value proposition” such as fuel efficiency offered by the Japanese, low price and long warrantees offered by the Koreans, of high quality offered by Lexus, in order to enter the North American market. They must also confront the competitive pressures from the established players in the market, especially against 250,000,000 used cars sold every year, he said.