The Chinese Rev Their Engines

Zhengchu Chen, general manager of Changfeng Motor, doesn't care if his company loses the race to be the first Chinese automaker to sell cars in America. He doesn't worry about rival automakers from the Chinese mainland beating him with coupes or sedans or mini cars that go 50 miles on a gallon of gas. What Chen does care about is exporting a competitive Chinese-made SUV, ideally within a couple of years. "What's important to us is for the market to accept us," he said through an interpretor in an interview at the Detroit auto show. On Monday, Changfeng took the wraps off five models, including a bright yellow 4X4 diesel-powered SUV, the Leibao CS6, a vehicle that may eventually go on sale at a dealershp near you. "We think Americans like big SUVs," he added. "When you drive this model you'll feel proud."

Changfeng made history on Monday, becoming the first Chinese automaker to display models on the show floor at the Detroit show. And it wasn't the only Chinese automaker in town: Zhongxing Auto intends to showcase its pickup trucks and SUVs to dealers in Detroit this week, with plans to enter the American market by the end of the year. Geely, another Chinese brand, is also readying cars for global export (Geely tiptoed into the Detroit auto show last year with a concourse display). And last month DaimlerChrysler announced a joint venture with Chinese automaker Chery to manufacture small cars in China and export them globally, including to the U.S., possibly bearing the Chrysler or Dodge badge.

None of this bodes well for Detroit, of course, or Asian manufacturers like Hyundai and Kia, which largely target budget shoppers. The Chinese cars are expected to carry rock-bottom prices along with generous warranties to ease concerns about their quality and long-term reliability. Since the Chinese exporters have such low labor costs — around $2 an hour — they can afford to pack the cars with standard features like electronic stability control, antilock brakes and rear-view cameras for parking assistance. Nor are the cars being designed with drab proleterian styling. The highly regarded Italian design shop Pininfarina produced the interior and exterior styling of the Liebao line. And lest you think Americans won't buy a Chinese car, consider this: according to an AP AOL-Autos poll conducted last month, 70% of Americans under age 35 said they'd consider a Chinese car (overall, respondents to the poll were evenly split).

As ominous as this sounds for Detroit, the flipside is that China represents one of the most promising markets for its products. General Motors' market share in China grew to 12.2% through the first nine months of 2006. GM's main Chinese joint-venture partner, Shanghai Automotive Industry Corp., produces Buicks, Chevrolets, even luxury Cadillac CTS sedans, and in 2006 GM's Chinese sales surged 32% to 876,000 cars and trucks, helping fuel profits in GM's Asia-Pacific region. GM expects sales in China to top 1 million units this year — making it one of the few fast-growing markets for the beleagured automaker. DaimlerChrysler and Ford are also producing cars in China for export (though so far not in the U.S.), benefiting from the low-cost labor too. > And with import tariffs coming down on cars and auto parts, foreign manufacturers may win even more sales in China — if they can hold off the increasingly sophisticated local competition.

Detroit may also take comfort in knowing that the Chinese cars sold in America will be novelty items at first, and it will take years for the Chinese brands to establish nationwide dealer and service networks. Nonetheless, executives like Chen are optimistic that they'll deliver a product suited to American tastes (and pocketbooks). Liebao is one of the most popular SUVs in China and Chen sees no reason why it can't win over American shoppers too. "When you drive this car," he says of the CS6, "you'll think it has value." Let the great Chinese car race begin.