[BringIt]

I'm new to this forum. I love cars and being a Chinese-American, I have a soft spot for anything Chinese. I'm even toying with the idea of opening a car dealer if and when a Chinese car company reaches our shores.

Anywho, I want to get some ideas on what would make Chinese cars successful in the US - arguably one of the toughest market in the world.

Here's what I think - and you guys can add to it:

- Cars MUST be well designed, well put together, and last a long time. No need to be industry leading, but must, at a minimum, be average. (Think Ford and Hyundai). To come into this market and rank at the bottom is disasterous, but to be industry leading is unrealistic, so shoot for average is the best bet.

- Cars must be cheap to run, maintain, and replace (parts). Use as much as possible, parts that are already available in autopart stores - belts, hoses, nuts, bolts, bulbs, fuses, shocks, brakes, gaskets, seals, etc. etc. The easier to find parts, the more likely people will buy the car.

- Must come with long warranties. Matches or bests anything others offer. Jack up the sticker price if needed, but these super long warranties does magic to ease people's fears of trying out a brand new line of un-proven cars. Heck, throw in free maintenance for 5 years too. Why the heck not? Imagine the customer satisfaction ratings - and repeat customers for future services and sales.

- The sticker price only need to be slightly lower than the next lowest competitor. Being lower is key, but not much lower. Put more money into warranties and free services such as 24hr road-side and oil change; heck, free car washes for the first year.

- Market smartly. Target the import buying crowd. Target the immigrant crowd. Target the mid to low income crowd. I would market heavily in Chinese and Spanish newspapers, and East and West coasts. Go after the "domestic" buying crowd later.

- More on marketing - a positive image must be clearly delivered. Whether it be cool and hip, smart and intelligent, or all of the above.

- Be ready to provide great service for recalls and warranty repairs. Give free car rentals, free car washes, free oil changes, or whatever other freebies when the customer is inconvenienced.

 

[Admin]

Currently the 2 main factors entrepreneurs are basing their hope that chinese cars will do well here are,
1.Very cheap prices compared to the competition
2. Something new to the industy (the hype around chinese cars)

obviously for success, there should be more factors analyzed...but im just stating what the main points are

 

[BringIt]

I agree. But if that is the only 2 things going for the Chinese cars, then Chinese cars shouldn't bother entering this market.

The average American consumer is too smart to pay for something cheap up front, knowing the repair costs and the inconveniences they'll face later on down the road.

Look at the Japanese car makers, esp Honda and Toyota. They are easily more expensive than the competition yet they keep growing and increasing their market share. Why? Because consumers are willing to pay more for the quality, longevity, and high resale value up front.

Take a look at the other 2nd tier Japanese car makers and the Big 3. Their cars are cheaper, but the lack of quality (real or not) hurts their sales.

Also look at Hyundai and Kia. It was not until they got their product up to speed (nice designs and better quality, along with the long warranty) that they start to grow in market share. They always had the lowest prices, but that along didn't get them very far.

The Chinese car makers have the chance to do it right, right out of the gate. A bad start will take years to repair the damaged image. Have as many corners covered, the better off it will be. If anything, don't bring crappy cars here! Even if the cars had to be sold at the same prices as the competition.

 

[Admin]

At the beginning this will be their strategy, but strategies evolve

Look at Hyundai and how it first came with the Excel, Look how much they have improved, i think they will have to enter the market first and then adjust to it, because you are right , the US is a totally different market than the Asian/Eastern Europe market.

But also when you are going after the market of customers that are buying their first automobile and wouldnt have the opportunity otherwise if it wasnt for chinese cars, then it really doesnt make a difference to them, other than the price...

Used car market is very big in north america, and many low income markets spend a few thousand on 1990 civic's which will break down in a few months and fail all tests..those ppl just want a car

 

[edge]

I think those criteria you've mentioned are quite on the point. I think that Chinese cars will eventually make it in America, but not everyone. There are already some Chinese carmakers who can meet the criteria you set forth, and there are some who are planning to export that just haven't quite got it yet.

I think the ones who already have what it takes are SAIC and FAW. They already have large manufacturing bases, high technology and the resources to build world class car companies.

The ones that I think will first stumble but eventually become big are Chery, and possibly a few other independent ones such as Great Wall.

The ones I see coming to the US trying to just dump tacky, pieces of crap ala the Yugo and Hyundai Excel is Geely and a few other small companies.

So I think the gap between the Chinese companies are pretty big, it really depends on which one you're talking about.

 

[Real_I_Hate_China]

- Cars MUST be well designed, well put together, and last a long time.

That doesn't come cheap.

To come into this market and rank at the bottom is disasterous, but to be industry leading is unrealistic, so shoot for average is the best bet.

- Cars must be cheap to run, maintain, and replace (parts).

The cheapest way to run, maintain and replace is simply not break down for the first 8 years like Toyota and Honda does.

- Must come with long warranties. Matches or bests anything others offer.

Long warranty can be a financial killer if the car is crappy.

Heck, throw in free maintenance for 5 years too. Why the heck not?

Too expensive even for the likes of Audi.

Imagine the customer satisfaction ratings - and repeat customers for future services and sales.

To make customers satisfied, you must first make dealers satisfied, by offering 15% margins and fat profits on services. Again, that costs money.

And customers are not satisfied if the car they drive is crappy.

The sticker price only need to be slightly lower than the next lowest competitor.

Actually it works better if you offer more for the same money.

Market smartly. Target the import buying crowd.

Import buyers are among the most brand royal customer groups.

- More on marketing - a positive image must be clearly delivered. Whether it be cool and hip, smart and intelligent, or all of the above.

Again, more money.

China is not exactly a cheap place to put together a car due to its lack of an auto parts industry.

I agree. But if that is the only 2 things going for the Chinese cars, then Chinese cars shouldn't bother entering this market.

So you have already figured this all out.

The Chinese car makers have the chance to do it right, right out of the gate. A bad start will take years to repair the damaged image. Have as many corners covered, the better off it will be. If anything, don't bring crappy cars here! Even if the cars had to be sold at the same prices as the competition.

Well then, Chinese should stay home for the next decade.

I think the ones who already have what it takes are SAIC and FAW. They already have large manufacturing bases, high technology and the resources to build world class car companies.

But not for the next 10 years.

 

[Admin]

Even though i dont agree with many of your posts - REAL_I_HATE_CHINA,

I do have to give it to you, you really analyze the arguments :thumb:

Its good to have PRO chinese auto posts and ANTI chinese auto posts

so far you are the only Anti-chinese auto poster...

i guess after some time , more will come..

 

[Real_I_Hate_China]

My arguement is rather simple.

Stay home until these Chinese cars are finally able to go head to head with Accord, Camry, and Sonata sold in China. Then think about entering foreign markets.

 

[hazik]

For some reason when Chinese cars first get to north america. I think a lot of black people will buy them first. I remember in the 1980's and 1990's not many people were buying hyundai's. But I saw a lot of black people driving hyundais. Black people will buy the car with the lowest sticker price and not worry about reliability, residual value, and others. They just want the most value for their buck at the sticker price.

 

[Admin]

My arguement is rather simple.

Stay home until these Chinese cars are finally able to go head to head with Accord, Camry, and Sonata sold in China. Then think about entering foreign markets.

but competition drives this kind of reliability, standard. When they come here, they will be on their toes 1-2 years, but after that they will adjust with the competitions standard and pick up their standard

They need to come to the US first, then they will raise to the next level

 

[hazik]

My arguement is rather simple.

Stay home until these Chinese cars are finally able to go head to head with Accord, Camry, and Sonata sold in China. Then think about entering foreign markets.

camry and sonata aren't that popular in China. Chery flagcloud and some Geely compacts outsell camry and sonata.

 

[BringIt]

RIHC,

Some of your comments makes perfect sense, some don't.

Yes it costs money to bring better designs, offer long warranties, even free maintenace. But it's money well spent to get the consumers to "want" the product. People buy well designed Toyota and Honda's because they want to, not because they have to (due to financial situations).

Any new car that breaks down under normal use and proper maintenance in the first 8 years is simply unacceptable. So that's a prerequisite to enter this market. (Even more reason to offer free maintenance - to monitor the wear and tear of the cars and to properly maintain them so they don't break down! It's a win win.) So the car can not be crappy. That's a given.

Maintenance is really not that expensive, especially in the first 50K miles. You got oil changes, and 15K, 30K, and 45K maintenance. It may cost a consumer $1,000, but the real cost for the dealer/car company is only $700. Not a big deal. (Especially given the prerequisite that the cars are not pieces of crap.)

Offer the same amenities for less or more for the same price - it's in the same line of thinking.

Wrong, "domestic" buyers are the most loyal. Import buyers jumps around between import brands all the time.

Chinese cars are not ready now. They can't yet fit the criteria I listed. But it won't take 10 years. I give it less than 4.

 

[Admin]

i think chinese cars can be ready in 2 years, not 4, and that is what most manufacturers have said they will be ready for US market in 2007-2008

 

[Real_I_Hate_China]

Any new car that breaks down under normal use and proper maintenance in the first 8 years is simply unacceptable.

Most Chinese cars don't last 8 years.

Maintenance is really not that expensive, especially in the first 50K miles. You got oil changes, and 15K, 30K, and 45K maintenance. It may cost a consumer $1,000, but the real cost for the dealer/car company is only $700. Not a big deal. (Especially given the prerequisite that the cars are not pieces of crap.)

Even $700 is a lot for a $7500 Geely.

Wrong, "domestic" buyers are the most loyal. Import buyers jumps around between import brands all the time.

Based on repeat buys, import buyers are more royal.

 

[BringIt]

That's what I'm saying. If the Chinese cars can't become "average" or better, don't bother coming just yet.

Add $700 to $7500 becomes $8200. Still a super low-priced car. But now you have free maintenance for 5 years!!!

Import buyers are loyal to "imports" in general, not to a particular brand. They go from one import brand to another quite often.

 

[jmsteiny]

absolutely right.............

Bringit's comments are absolutely spot on right when it comes to chinese cars being successful in the USA.........a average car (no need to try and out-do Honda or Toyota) that offers a great warranty at a low price. Marketing is also important, and the chinese car companies that venture into the US market MUST be smart about who they aim their marketing campaign at!

A couple of things to consider when comparing the entrance of the chinese car companies to the US market with Hyundai and Yugo........first of all, Yugo WAS a piece of garbage. It was originally designed in eastern Europe, and in the 1980's any car coming from there was absolutely terrible (remember the east German Trabant???? It was a nightmare of a car....) Yugo did NOT have a effective marketing campaign, getting it repaired was a real challenge (lack of parts availability) and it was downright dangerous (a very high center of gravity and a real lack of power). Hyundai, on the other hand was a MUCH better car in comparison. I actually bought a new 1988 Hyundai Excel..........marginal power (but acceptable if you used the transmission properly), fairly reliable (I had no problems at all during the time that I owned it), great on gas mileage and a relatively comfortable car for what it was. Hyundai also marketed the car very well (in fact Hyundai set a sales record for the Excel in 1986.....over 250,000 Excels were sold that year) and also worked hard to have parts available when needed for repairs. Granted, the Excel had a very poor resale value and after 5-7 years it was pretty much ready to throw away..........but for a car that started at $4999 in US dollars, what can you expect? The main thing is..........Hyundai managed to establish itself in the US market because of the Excel and was able to hang on throughout the 1990's until their quality improved enough to market a seriously good car. Today's Hyundais are competitive with the japanese cars, offer better warrantys (the best in the business) and Hyundai is becoming a serious worldwide player in the car market........all this in just 20 years since entering the US market.

Can the chinese cars match this? Doubtful - the car market today is MUCH different than 20 years ago. However, they DO have the capability of marketing a car that won't be laughed at (today's manufacturing technology is vastly improved from 20 years ago) and will be reliable enough - not great but enough. Whichever company (or companies - FAW, SAIC, Chery, Geely, etc..) starts to sell their cars in the US will HAVE to have great aftermarket service and parts readily available when needed. Also remember........with gas prices going up, up and up the gas guzzling cars (i.e most american SUV's and large cars) are going to drop in sales volume........and most of the chinese cars coming to the US will be of the "small engine" variety - 2.0 liters in size or smaller. The chinese cars will be in a great position to take advantage of rising gas prices - much like the japanese cars took advantage of the oil embargos of the 1970's in the US. The chinese cars won't take over the market like the japanese did 30 years ago - but they WILL establish themselves and be able to hang on.

 

[hazik]

Hyundai Excel only costs $4,999 in 1986, Chery QQ costs about the same in China today. What was the second lowest price car in 1986, Geo Metro?

 

[Real_I_Hate_China]

When Toyota entered the US market, its rivals were GM, Ford, and Chrysler's gas guzzling dinosaurs with crap build quality, so it was easy for Toyora to take a root in the US.

When Hyundai entered the US marekt, its rivals were 2nd tier Japanese brands which were not better than Excel except for reliability, so Hyundai was able to take a root in the US after burning tens of billions in cash.

When Chery enters the US market, its rivals will be Toyota and Honda subcompacts offering much higher quality and engineering at 10% premium. Furthermore, the emissions and crash testing regulations would have toughened to the point it is difficult for newcomers to meet.

In other word, the market for inexpensive and poor quality cars has closed.

 

[BringIt]

The market for poor quality cars has closed. Not so for low priced cars - lower prices never goes out of fashion my friend, never.

So, again, whether it's Chinese or Indian or Brazilian, the formula for success is average or above quality and design, low price, long warranty, good marketing, and other freebies such as free maintenance and road side assistance.

Now, that's just to get in the market and establish a foothold. Further down the road, superior design and engineering, and a sterling reputation will be needed to expand.

 

[Vitesse]

Toyota took a beating when it introduced cars here in 1958. The Toyopet was soon withdrawn because it was not a quality car. In fact the cars which really established a beach-head for the Japanese makers were Renault, MG, Hillman, Volkswagen, and Fiat. It was these companies which first introduced small cars successfully in the United States - although detroit had tried earlier with the Henry J, the Hudson Jet, and the American Bantam.

Japanese cars in the fifties and sixties were usually licensed copies of European or English designs. Hinos were Renaults, Isuzus were Hillmans, Datsuns were Austins - eventually the home-grown Japanese cars were created out of these license-built copies.

We see the same thing happening in China now, where home-grown cars are begining to supplant modified Diahatsus, Citroëns, Suzukis, and Jeeps.

But in the 1960's there was a great deal of trouble with those other imports. They were often complicated and had poor dealer networks and expensive service. To this day people think Fiats are expensive to service when it's anything but true. I own an old Fiat and it's cheaper to run than all of my other cars save one - a mk1 VW Golf diesel.

Industrial problems and labor unrest in France, England, and Italy led to poor quality cars, not to mention Italy and France tending to buy low-grade steel from the USSR which resulted in horrible rust problems on cars like AlfaSuds, Fiat 127's, and Renault R12's.

In the meantime the Japanese production system figured out how to make those Euro-influenced designs with streamlined precision while workers bickered endlessly in France and Italy's political arenas.

It was no surprise, therefore, that Japanese cars became successful in the 1970's when American turned to smaller cars in droves. But they also turned, at first, to those European imports. Fiat was, at one point, the fastest-growing import brand in the US during the 1970's - briefly outpacing Toyota and Datsun in 1973-1974.

While the cars held together well, they still had lots of problems. For one thing, Japan was way behind the curve in adopting modern small-car construction. Other than Honda, it took until the 80's for transverse-engined, FWD Japanese cars to become common in the US market. They also had collosal rust issues - just as bad as the Italians and the French in many ways. Ever seen an old Datsun 200SX mk1? Probably not - because all but a handful rusted away decades ago.

What does all this mean for Chinese cars in the USA, you ask?

Well, not much. The market has changed so radically since the 1970's that the rules that once applied to the up-and-coming Japanese and European brands are no longer exactly true. Nor can you rely solely on a low price and a reworked old-design to buy you sales in the US - Yugo learned that lesson the hard way.

If Chinese cars are to succeed in the US, then they need a few key things:

1. The perception of the public will be deeply effected by poor quality or by excellent quality. If the cars are well made, the public will instantly accept them. If they're poorly made, they'll be outcasts for years and years - only now, 20 years later, is Hyundai coming out of the funk it got in after the failure of the Excel in the 80's.

2. The products must be original. You cannot sell an old Daihatsu here (as Geely proposes) and expect it to work. Americans ignored the Daihatsu Charade when it was offered here in the 1980's and now that it's 20 years old they're going to be even less amicable towards it. The cars must be brand new and well executed original designs.

3. You can't sell on price alone. Because of the proliferation of off-lease, off-fleet cars on the Used car market, you can get alot more out of a two-year old Chevy than you can out of a brand new Geely. For that reason there has to be a reason other than price to buy a Chinese car. Styling, innovation, economy, and comfort all help sell cars. Build something that exemplifies these qualities and the public will bite. But there has to be more than just a low price.