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First Chinese Model Bursts on Scene in Detroit

Chinese vehicles will be a threat to established U.S. auto sellers because vehicles from China are likely to be much cheaper than those from Europe, Japan or North America.

Published: 13-Jan-2006

Chinese automaker Geely has moved up its timetable for selling cars in the USA, while rival China-car entrepreneur Malcolm Bricklin has pushed back his ambitious plan to launch cars built by Chinese automaker Chery.

Geely (JEE-lee) now plans to put a compact sedan and a sports car on sale in the USA in the fall of 2008, several months earlier than it had expected, according to John Harmer, COO of Geely-USA. Development of the cars to meet safety and anti-pollution regulations is moving more quickly than anticipated, he says.

Bricklin, first to say he would sell Chinese cars in the USA through his Visionary Vehicles, says he's delayed the planned launch of five Chery models until late 2007 from early '07. That's to allow time for upgrading the Chery 3-liter V-6 to 3.6 liters, and to develop a six-speed transmission to replace the four-speed used in China.

Chinese vehicles will be a threat to established U.S. auto sellers because vehicles from China are likely to be much cheaper than those from Europe, Japan or North America. Wages are low in China, and auto-manufacturing equipment is modern and efficient. The Chinese government is paying for some costs that U.S. and other automakers pay themselves.

For instance, Bricklin says the government just put $279 million into helping Chinese automakers develop gasoline-electric hybrid vehicles.

Geely is exhibiting its 7151 CK compact sedan at the North American International Auto Show here, the first time a Chinese model bound for the USA has been displayed. The U.S. model will be a refined, renamed version of the car shown here.

The sports car, not on display here, will be similar to one sold overseas called Beauty Leopard.

Harmer says the first 2,000 Geely vehicles will be sold in Puerto Rico. "We'll give people free oil changes, give them a warranty that says we'll fix anything that can possibly go wrong outside of hitting a brick wall. In return, owners will come in once a month for interviews about their cars, tell us what they like and, more important to us, what they don't like."

Geely hopes that will uncover any problems in time to make changes before the cars hit the USA. Harmer won't sign up dealers or make sales forecasts until closer to launch. The sedan is expected to be about $10,000 — "unless the Chinese revalue their currency."

Meanwhile, Bricklin says he no longer will require his dealers to erect giant facilities that were to include test tracks, car washes and theater screens. "Dealers told me, 'Malcolm, if you want to put us out of business, just make us put up that building before we have the (sales) volume to support it.' "

Bricklin says he has split the USA into 250 exclusive sales territories. He expects some big dealers to buy several territories, resulting in about 100 dealers owning sales rights for the 250. "I expect to have that wrapped up by the end of March," he says.

He thinks that having too many dealers close together leads to competition with one another instead of with rival brands. It eliminates the possibility of one-price selling, which he believes car buyers prefer.

And, he notes, Chery cars should be inexpensive enough that discounting isn't necessary. He says he'll be able to sell cars at about 55% of the prices of similarly equipped vehicles — $19,000 to $20,000 for a vehicle that others price at $35,000, for example.

Among the first models: a mainstream sedan, a four-seat convertible and a crossover-utility vehicle.

The cars won't use the Chery brand name in America. General Motors successfully argued that would be confusingly similar to Chevy, shorthand for GM's Chevrolet brand.

Bricklin is a veteran auto entrepreneur. He brought Subaru into the USA and later introduced the Yugoslavian car Yugo. He sold his stake in Yugo, and it went out of business. He also developed an exotic sports car, called the Bricklin. It was manufactured in the mid-1970s but never caught on.

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