Modifying the Automotive Industry with Chinese Vehicles

Modifying the Automotive Industry with Chinese Vehicles

The impending "invasion" of Chinese automobiles into the North American market has been the subject of numerous news stories over the past few months. It's the modest prices at which each model will be marketed that have caught the attention of many auto enthusiasts. One model's price was reported to be $6,600, and the estimated retail price of several other versions was said to be much under $10,000. If the predicted influx of Chinese-made automobiles occurs, the production and distribution of inexpensive vehicles in the United States and Canada should expect a radical shake-up. Increased competition is good for consumers, though it's unclear what they'll get for their money at this point.

With rebates and incentives factored in, the Chevrolet Aveo, a tiny automobile manufactured by GM's Korean subsidiary Daewoo, may be purchased for as little as $9300 (the MSRP for the "Special Value" variants is currently fixed at $9890). Chevy includes an AM/FM radio and a 16-valve 1.6-liter I4 engine as standard equipment. The car is essentially naked beyond that.

Meanwhile, two Chinese manufacturers are getting ready to enter the American market, most likely by the summer of 2007. Both the Geely Automobile Company and the Chery Automobile Company are collaborating with U.S. officials to establish national dealer networks for the sale of 2008 model-year vehicles. 

Chery will likely adopt a new moniker after losing a legal battle with GM over their brand [too similar to Chevy], and the Chinese automaker plans to change the name of its "QQ" model, which is based on the Daewoo Spark, before introducing it to the American market.There will be as many as four different models, each with a price tag that starts at around $7,000 and goes all the way up to $20,000. Geely plans to promote automobiles at comparable prices.

For the market, what does this mean? Plenty. Numerous other compact cars, such as the Honda Fit, Nissan Versa, Saturn ION, and vehicles from Kia and Hyundai, are sold in the United States alongside the Aveo. There are a few that have more features than the basic Aveo, but even the cheapest ones with air conditioning cost nearly $12,000!

Geely and Chery models with comparable equipment are predicted to sell for $8-$8.500 after the addition of air conditioning and certain safety measures [such as air bags and better fenders] to entry-level Chinese automobiles. As a result, the price might be reduced by as much as 30% when compared to similar models on the market.

Naturally, you may have serious doubts about the reliability of Chinese automobiles. not well known for producing many high-quality products. Similar to Japan over 40 years ago, China needs to improve quality. A longer guarantee, such as the 100,000-mile warranties offered by Hyundai and Kia, might ease customer anxiety for as little as $1,000 extra per vehicle. To make a fully warranted Geely under $9,000 more appealing, just add the cost of the warranty to the price.

The question now is how other producers will respond. In other words, they reduced their rates to reflect the situation. It is expected that Scions, Kias, and Hyundais with special equipment would start showing up in U.S. showrooms with prices below $10,000. Ford and Dodge Scion rivals produced in Mexico will soon appear, too, and they will be marketed at jaw-droppingly low rates. Many entry-level models in the United States will have a starting price of less than $10,000 by 2010. If they are not priced competitively, they may not sell.

As Chinese automakers begin selling SUVs and other vehicles with more features than their entry-level offerings, the market for all automobiles could eventually see a decline in price. Somewhere around $20,000 was dropped as the price of the car being discussed. Like the Chrysler Pacifica, this Chery model might be imported to compete with the likes of it in the crossover market.

This might have far-reaching consequences for the American manufacturing sector, not just for General Motors, Ford, and DaimlerChrysler. Numerous major automakers, including Toyota, Honda, Nissan, and Hyundai, produce vehicles in this country. Will they try to undercut one another on price, or will consumers see the significant quality variations between the various brands and opt to remain with the more well-known names?

The car industry is on the verge of a revolution that will undoubtedly transform the sector and the market as a whole.