Yes, China's Car Industry Matters

Posted by: David Welch on January 16, 2008

During an interview on Sunday at the Detroit auto show, BYD Auto Chairman Wang Chuanfu admitted readily that a push into the U.S. is 3 to 5 years away. Similarly, other Chinese carmakers at the Detroit auto show, like Geely and Changfeng, aren’t ready for America, either. My colleague David Kiley bluntly points out in a related item on this blog that the Chinese won’t be here any time soon. Duh.

None of these companies have the distribution networks or product quality to make it in the States. Not yet. But they still matter. First, Chinese carmakers may wind up on a different trajectory that the Japanese and Korean carmakers. A lot of them work with major car companies like GM, Ford, Toyota, Volkswagen and Nissan in China. It’s the law. Outsiders must partner with a Chinese company to do business there. Do you think the Chinese are learning something about how to engineer and build cars that are ready for prime time? They’re getting technology straight from the industry’s leaders. Geely was at the Detroit show displaying its London cab, which it will soon sell in England. Chery will be making cars with Chrysler and they’ll be sold here.

And BYD? Getting to the U.S. in even five years may be tough. But if the company really starts selling a plug-in hybrid in China this year as promised, it’s worth watching. BYD is a lithium ion battery maker first. Chairman Wang bought into the car business in 2003. Even if he launches his F6DM plug-in hybrid and it fails, I know some engineers who’d like to rip the car open and find out why. If nothing else, BYD could be a guinea pig for an industry that needs to master lithium ion batteries to deliver on many of its high-tech promises. That makes the company’s play very much worth watching.

China’s carmakers may be irrelevant to an American shopping dealer row in Galveston, Texas. But from a business perspective, their development will be fascinating. My pal Kiley says they’re not worth reading about until they have a real presence here. Well, if U.S. market share were the barometer for interest we’d be without his volumes of coverage on every marketing decision made at Volkswagen, which now has a paltry 1.4% of the U.S. market. Come to think of it, maybe he has a point.

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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