January 12, 2009 - Detroit Auto Show, Detroit MI

A Small Showing, but With Big Dreams

Wang Chuanfu BYD Chairman

Brilliance Auto

For the first time, two Chinese carmakers

are exhibiting thisyear on the main floor of the Detroit auto show, a promotion of sorts from the usual spot they were given for previous shows in the convention hall’s basement or lobby.

One of those carmakers, BYD, a Chinese manufacturer that produces many of the world’s cellphone batteries and only began selling cars in 2003, also upgraded its ambitions, saying it would be the world’s largest automaker by 2025.

Few people here are willing to dismiss its goals as absurd.

“They are very competent in the battery business,” Nick Reilly, president of the General Motors Asia-Pacific region, said of BYD. “I think they’ve got a fair way to go on the car side of the business. But they are certainly not to be ignored. They have a great deal of support from the Chinese government.”

Brilliance Auto, which has relationships with BMW and Porsche, is the other Chinese carmaker on the main floor.

BYD, which stands for Build Your Dreams said that by 2011, it planned to begin selling in the United States an electric crossover vehicle with a 250-mile range and a plug-in hybrid vehicle. It started selling a smaller version of the plug-in hybrid in China last month, almost two years before the Chevrolet Volt is scheduled to go on sale, and a year before Toyota says it will introduce a plug-in vehicle.

“We think it’s quite practical and can do well in this market,” the chairman of BYD, Wang Chuanfu, said in an interview. “We are a company that, when we set a target, we’re going to make it.”

Analysts are not so sure that BYD or any other Chinese manufacturer is that close to arriving in the United States. Similar promises by companies like ZX Auto, which vowed during last year’s Detroit show that its vehicles would arrive stateside by the end of 2008, have fallen short.

Mr. Wang said BYD was studying how to establish a dealership network, which analysts said could take longer than expected.

“They underestimate how much it’s going to take to break into the market,” said David Champion, director of auto testing for Consumer Reports. But Mr. Champion called some of the vehicles, “very impressive.”

Brian Johnson, an analyst with Barclays Capital, expressed skepticism about the companies’ lofty claims, though a recent investment in BYD by Warren E. Buffett’s holding company, Berkshire Hathaway, has considerably increased its credibility.

“They’re making five-year leaps every year,” Mr. Johnson said. “But the interiors and styling still need work.”

Executives from Brilliance said they planned to export vehicles to North America, Europe and Russia but gave no time frame for entering the United States. For now, Brilliance is gauging reaction to its cars and learning about the market.

The Detroit show “is an excellent platform to measure ourselves against international standards,” said He Guohua, a Brilliance vice president.

The company, which said it has 35,000 employees and $4.5 billion in assets, is showing four cars in Detroit, including a sports car and a luxury sedan.

“They are all really nicely done,” Mr. Champion said.

Original Story - New York Times

Update January 16, 2009

AT the Brilliance Jinbei Automobile display in Cobo Center on Monday, journalists and guests were served that quintessential American form of refreshment, Coca-Cola — in 6-ounce glass bottles.

The Chinese are keen observers of American tastes. The country’s automakers can be expected to cater to those tastes while working to enter the United States market. But Chinese cars are still not here, despite promises from some of the companies at last year’s Detroit show that their arrival was imminent.

Some of those carmakers are already out of business; others are struggling to survive. Analysts said that while the remaining companies still had a long way to go in producing a car that met American tastes and safety standards, they should not be underestimated.

“The Chinese will get here, eventually,” said George Peterson, an industry analyst and president of AutoPacific, in an e-mail message. “They are fast learners, fast movers and good implementers when they have accurate blueprints. But right now they are a generation away from having competitive vehicles, and it appears most of them understand that.”

The latest indication of how far away the Chinese threat remains was both on display, and not on display, here. Gone from Detroit this year were previous Chinese exhibitors like Chamco, the short-lived American distributor for Hebei Zhongxing Automobiles, Geely and Changfeng.

And the two Chinese automakers who were in Detroit this year (on the show’s main floor for the first time, partly as a result of other automakers dropping out), Brilliance and BYD Auto, seemed farther away than their previous forecasts for introducing cars in America. Three years ago, Brilliance had announced a goal of 2009 for beginning sales in the United States.

So why was Brilliance showing four of its newest models in Detroit? Because the company still wants to enter the United States and says it has the expertise to make it happen. “In a joint venture with BMW, they assemble 3 Series and 5 Series sedans in China; they assemble Toyotas; they assemble four different engine lines,” said Jack Gerken, a spokesman for Brilliance at the show. “It’s just a tough market right now, both here and back home in China.”

He Guohua, vice chairman of Brilliance, added: “We are in Detroit because it is the perfect opportunity for us to measure ourselves against international standards.”

So far, that has been a sobering experience.

“We realized we need to do more work on our cars to reach America,” Mr. He said. Brilliance will redesign its lineup with United States crash and emissions requirements in mind.

“The one weakness Chinese automakers appear to have is that they don’t listen to consumers very well,” Mr. Peterson said. “They don’t understand how really important things like safety, reliability and durability are.”

Over all, the Chinese domestic auto market has entered a turbulent period of retrenchment, consolidation and contraction.

Survival is now in doubt for Chery Automobile, which previously walked away from agreements with both Chrysler and the entrepreneur Malcolm Bricklin to build cars for America. Chery has announced layoffs, pay cuts and a freeze of development for some new models.

Another large Chinese automaker, the Shanghai Automotive Industry Corporation, a strategic partner with General Motors, is suffering from its 2004 acquisition of a controlling stake in South Korea’s Ssangyong Motor Company, which just filed for bankruptcy protection, and its 2007 merger with the troubled Nanjing Motor Company. Shanghai Automotive has rebuffed advances from G.M. to buy Saturn and Hummer.

Though environmental sustainability is far down the list of concerns for Chinese automakers, BYD Auto is trying to find a niche in the industry by being the first to put mass-produced plug-in hybrids on the road. BYD started selling its F3DM in China last month.

Some reviews of the car have not been kind, and the company answers criticisms of the car’s steering, motor integration and braking with concessions that the car might have been offered for sale prematurely, just to gain bragging rights for beating other automakers, including G.M. with its Chevrolet Volt, to market.

But BYD, buoyed by a $230 million investment in September from Warren Buffett, brought the F3DM and two electric prototypes to Detroit and said the vehicles would be on sale in the United States by 2011.

“We are committed to a green future for our planet,” said Wang Chuanfu, chairman of BYD. “We have the ability, the capability and the desire to be a significant part of the solution.”

Mr. Wang also declared BYD Auto would be the world’s No. 1 automaker by 2025.

“The Americans cannot relax,” Mr. Peterson said. “But they can watch the Chinese closely and be prepared for when they do enter the market. There likely will be a couple of forays that will fail, such as Bricklin and Chamco, but then one Chinese company will land and establish a beachhead. Then, inexorably, we’ll begin seeing more and more Chinese-made vehicles on the road.”

Update Story - New York Times