Sparks fly as employees work on the door of a Trumpchi brand vehicle on a production line at the Guangzhou Automobile Group Co. Ltd. (GAC) plant in Guangzhou, China, on Wednesday, Nov. 2, 2017. Photographer: Qilai Shen/Bloomberg
Late last year, GAC Motor Company (GAC Motor), a subsidiary of Guangzhou Automobile Corporation (GAC), announced that it plans to begin selling its cars in the United States by late 2019. If successful, GAC Motor would be the first Chinese automaker to penetrate the U.S. market, following in the footsteps of German, Japanese and Korean carmakers that have made the jump from their home markets to the world’s most demanding auto market over the past 70 years. GAC’s success is not guaranteed, however, particularly given that several previous attempts by Chinese original equipment manufacturers (OEMs) to sell cars in the United States never got off the ground.
In the mid-1950s, the U.S. auto market was a much simpler place. General Motors, Ford, and Chrysler—the so-called “Big Three”—dominated the industry, manufacturing 94% of the 7-8 million cars and trucks that were produced every year. Tiny American Motors and the troubled Studebaker-Packard Corporation accounted for most of the balance, and imports were virtually non-existent. The only imported car being sold in the United States at the time was the Volkswagen Beetle, which got off to a slow start when it was first introduced in 1949 but began to gain traction with American consumers in the 1960s. As the Big Three struggled with quality issues in the late 1970s, the Japanese car companies began to make headway, and in 1986, Hyundai came to America.
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Through a great deal of hard work and attention to service and quality, the newcomers have been able to overcome their initial reputations for low cost and low quality to the point where many are considered quality leaders today. The attention to quality has paid off in increased sales and market share. From its high point in the 1950s, the Big Three’s market share has declined to just under 45% and is now neck-and-neck with the combined market shares of the Korean and Japanese assemblers. Volkswagen, Daimler and a handful of European OEMs account for the balance. Despite the size of China’s auto market, which is now nearly twice as large as that in the United States, no Chinese OEM is represented—but it is not for a lack of trying.
In 2005, Chery Automobile Co., Ltd. (Chery) made the startling announcement that it would begin importing and selling 250,000 Chinese-made sport utility vehicles, sedans, and sports coupes in the United States. “Audacious, gutsy, and maybe a little nutty,” was how this announcement was described by industry observers. After all, Chery had no brand value with U.S. consumers, and everyone doubted Chery’s ability to meet the emissions, safety and quality requirements of sophisticated American consumers.
Zhejiang Geely Holding Group (Geely) was the next Chinese car company to dream the American dream. In 2006, Geely announced that it planned to export cars to the United States beginning in 2008, and to land a basic model in dealer showrooms for $7,500. Like Chery, Geely’s efforts were unsuccessful.
A Zhejiang Geely Holding Group Co. Boyue sport-utility vehicle (SUV) stands on display. Photographer: Charles Pertwee/Bloomberg