NEW YORK (CNN/Money) - Clothes. Computers. Will cars be the next big Chinese import in the United States?
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The Buick Sail rolls of a production line of a GM joint venture in China. |
Experts say yes, it's inevitable that Chinese cars will eventually be a major force in the U.S. and other developed markets. But they say that while the cars will be made in China, they will likely carry very familiar Western brand names like Chevrolet, Honda and Volkswagen.
"If you look at mistakes they (U.S. automakers) made with the Japanese automakers, they missed their opportunity to partner with and be a controlling force behind Toyota and Nissan," said Denton Dance, director, emerging markets forecasts for J.D. Powers & Associates. "The global Big Eight are not going to sit by the side and let something big come into their home markets from China without being a part of it."
The major U.S. automakers such as General Motors Corp. deny they have any plans to sell vehicles now being built at their joint venture plants in China back in the United States. They say strong demand for autos in the Chinese market is swallowing up all Chinese production, and more.
"We're struggling to keep up with demand there," said General Motors Corp. spokesman Jerry Dubrowski.
Experts agree the growing Chinese market will delay any meaningful Chinese auto imports here. But they say the flood of investment by the Western automakers' new Chinese plants could create excess capacity in the coming decade, and create an incentive for exports, likely sometime in the next decade. Dance sees Chinese-made cars hitting the U.S. market 15 or more years down the road.
"They're going to do it (export cars to the United States) eventually," said Gary Silberg, partner with auditing firm KPMG's auto practice. "Their advantage will clearly be on the smaller, low-end cars."
Silberg and other industry experts say the agreements between the major global manufacturers and the largest Chinese automakers may stop the Chinese from ever having direct sales into the U.S. market.
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"I don't see much advantage of them setting up a complete new network to sell the product in competition with their partners," said Max Pemberton, author of a recent study on the Chinese auto industry for London-based auto research firm Autelligence.
One U.S. auto industry executive, who spoke on condition that his name not be used, said that while he agrees the Big Three U.S. automakers don't have any immediate plans to sell their Chinese vehicles back here, that kind of export could make sense down the road.
"When it makes economic sense, it will happen," said the executive. "Every year the auto industry takes on a more global look. Manufacturers are going to go where they can produce quality vehicles most efficiently."
Industry experts point out that U.S. automakers have had trouble producing the low-price compact cars cheap enough to make money on them in the U.S. market. China, with state-of-the-art technology in its new plans and low labor costs, could allow the Big Three to compete more efficiently in that market, they say.
In January GM started to import its new compact car, the Aveo, that is being built in Korea by GM-Daewoo Auto and Technology Co., the joint venture formed after GM purchased the bankrupt automaker there. It has sold about 21,000 of the vehicles in its first six months in showrooms. Dubrowski said that unlike GM's Chinese investments, GM-Daewoo is being set up primarily to serve the export market, including shipments to China.
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The low price for Chinese cars is what Arizona businessman David Silburg said is leading him to try to import Chinese cars to the United States as soon as the end of this year. He is selling dealerships in his company, China Motor Corp., to sell cars from three different Chinese manufacturers.
"The price is what's going to do it," said Silburg. "People see these vehicles and they can't believe it -- it looks like a baby Mercedes with a $9,000 price tag."
But J.D. Powers' Dance said the manufacturers that Silburg is trying to bring in are the smaller Chinese automakers that don't have joint ventures with Western automakers. He said that while the quality of the Chinese-western joint venture autos is quite good, the quality of the regional Chinese automakers is significantly worse than U.S. or Japanese vehicles.
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"To me that has Yugo written all over it," he said, referring to the much-derided and short-lived Yugoslavian import. "It's going to be a flash in the pan, some short-term hype, but I don't see it lasting."
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