The new motor city (cont.)

The best selling Chinese passenger cars in Chile come from Chery, China's leading domestic brand. Owned by the local government of Wuhu, inland from Shanghai, Chery is expanding ambitiously. It boosted its 2007 production to 387,312, up 22% from the preceding year.

As China's top car exporter, Chery sold cars in nearly 70 foreign countries in 2007 and has seven assembly plants, in Asia, Africa, Europe, and South America. It sells four models in Chile, including its bestseller, the IQ - a $6,000 small car patterned after a Korean design, loaded with power windows, air conditioning, and aluminum wheels.

Chilean consumers know a bargain when they see one. Consider the poor showing in Chile made by Indian car manufacturers, which have been selling there for a decade. Though Indian carmakers also boast low-cost labor at home, India, unlike China, has no free-trade agreement with Chile and must pay higher tariffs, making its prices uncompetitive. Indian companies also are less aggressive.

Mahindra, an old-line truckmaker, first entered the market with an $18,000 crew-cab pickup truck and followed that with an SUV based on the old Mitsubishi Montero. But it didn't put much marketing muscle behind either model, and it made few inroads.

Tata, meanwhile, which is making a name for itself on the global stage by buying Jaguar and Land Rover, has made even fewer inroads in Chile. Tata's (TTM) first Chilean entry, a car called the Indigo and based on an old Fiat, has been readied for sale but so far hasn't been introduced.

GM, for one, figures it has some breathing room, at least on its home turf. Before the Chinese make an assault on North America, "China will focus on emerging markets, learning about distribution and marketing," says Beamer. "The U.S. is a very sizable challenge."

In Chile, though, the battle has already been joined. GM staged a competitive vehicle assessment in Chile earlier this year for global executives. Among 110 vehicles studied, the Chinese brands got the most attention. GM is preparing to defend its No. 1 ranking by becoming more aggressive in the marketplace, building on its brand strength, and promoting Chevy's value for money.

"We have been on the front lines here in Chile for as long as I can remember," says GM's Colossi. "Chery and Great Wall are the first two attackers of the emerging markets. We need to fight."

Perhaps the shape of many battles to come.  

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