Experts Urge Caution as Chinese Automakers Eye Western Markets

Luis Ramirez
Voice of America
Beijing, China
September 11, 2006

China's soaring trade surplus is the source of friction between Beijing and the United States and Europe. But one product the United States and European Union perhaps should not worry about is Chinese cars.

Cars are among the few Chinese-made products that are yet to be visible in markets around the world. China's car makers have for years been trying to make inroads into overseas markets.

China's car manufacturers have sold cars and trucks to smaller markets including Iran, Syria, Egypt, - and to a lesser degree - Colombia, Indonesia, and Vietnam. But the car makers' efforts to penetrate wealthier western markets have been slow.

Experts say Chinese auto makers are being careful not to make the same mistakes a South Korean car maker did when it introduced low-priced, but poor-quality, vehicles to the United States in the 1980's.

John Humphrey is manager of China operations for the U.S.-based car industry consultants J.D. Power Asia Pacific. He said that strategy ruined the reputation of South Korean vehicles and hurt the company's sales - and image - for years.

"The price-only strategy does not work. These folks in China, the Chinese local brands, are studying that," said Humphrey. "And I think they are realizing that that price-only strategy will not work unless the quality of the product gets better. I think that is a primary reason why you are seeing some delay of the launch plans of some of these brands."

Humphrey says Chinese-designed cars are far behind Western models in terms of quality, but he says they are improving quickly as the domestic market grows and competition increases.

Seven-million vehicles are sold in China each year. That means China this year surpassed Japan to become the second-largest car market in the world after the United States, where more than 16-million are sold annually.

At least two Chinese car makers have said they want to export to the United States, but there has been no confirmed date for starting shipments.

In China, the domestic makers have plenty of competition. Many of the top European, Japanese and U.S. car makers have factories in China, turning out millions of cars a year.