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Cheap Chinese cars rattle auto industry
The Chinese are flooding global market with cheap cars. Others are biting their nails.
City cars that cost $4,000? SUVs that retail at 15,000 euros? The Chinese are coming and global car giants are biting their nails.
Many US and European companies have linked up with Chinese groups to make cars for what is now the world's third-largest auto market. But now the inevitable second phase is beginning - cheap exports are starting to seep out of China.
In July, the first Chinese-made sport-utility vehicles (SUVs) went on sale in Europe at about half the price of their nearest rivals. Another two Chinese carmakers are showing at the Frankfurt car show, testing the water for future sales.
Industry executives said Chinese carmakers had reached the level that Japanese groups were at 30 years ago and the Koreans 15 years ago, before they went on to knock holes in the home markets of U.S. and European manufacturers.
"I just warn everyone not to take this lightly. The third wave is coming inexorably towards us and we have to be prepared for it," said Wolfgang Bernhard, head of the Volkswagen brand.
But executives still doubt how fast the Chinese will make inroads into major markets and how successful they will be.
Independent Chinese carmaker Geely displayed five models on a tiny and rudimentary stand at the back of the Frankfurt show. The doors were locked so show-goers were unable to discover how the cars felt from a driver's perspective.
But the crowds that gathered to watch a dance troupe pose on the cars in traditional costume was a clear sign of interest.
"We are a messenger for the Chinese," said Vice-President Jie Zhao. "Geely's presence here in Frankfurt aims to present cars to all the world and promote our reputation in overseas markets and show we can make good cars that anybody can afford."
Questions remain over quite how good Chinese-made cars are and whether they can meet emission rules or offer now common safety features like airbags while still keeping prices low.
Geely said it needed to improve its engines to meet new environmental regulations before moving to Europe. Meanwhile, Jiangling's Landwind SUV, which is about to start selling in Germany, has been slammed in safety tests.
"It had a catastrophic result. In our 20 year history, no car has performed as badly," said German automobile association ADAC after carrying out a crash test on the 15,000-euro car.
Nonetheless, Landwind importer Peter Bijvelds has already sold 400 cars since they arrived from China in July and expects to sell at least 1,000 in the first full year. Within two years, he wants a full Landwind service network across Europe.
"China will certainly become more competitive over time like the other two Asian competitors did, but that's not a scary prospect. We just have to be better than them." Dieter Zetsche, DaimlerChrysler's chairman-in-waiting, told Reuters Television.
General Motors CEO Rick Wagoner said the Chinese could be serious competitors one day but that they might make slower inroads into competitive, mature markets than expected.
Korea's Kia, which is quickly eating into the European market, said China was less of a worry than India, a fast-emerging economy that has been hidden in China's shadow.
"The image of China is cheap quality while India is sophisticated organisation and quality," said Kia Europe Vice President Jean-Charles Lievens.
Indian carmakers like Tata and Maruti are not showing in Frankfurt this year but watch out -- a fourth wave might be on its way.
