The Rocky Road: Importing Chinese Cars
Importers experience a rocky start with Chinese vehicles, but are not giving up.
In February, 2008, J.D. Power and Associates traveled to San Francisco for the 2008 National Automotive Dealers Association (NADA) Convention, a four day conclave that attracted more than 23,000 U.S.-based automotive dealers, executives from global vehicle manufacturers, and executives and entrepreneurs from support industries ranging from software to sign making.
People came to look, network, sell and talk with their peers. Even though the meeting centered around the U.S. auto industry, it was difficult to miss the range of languages being spoken by visiting dealers from around the world. Walking the exhibition floor, standing in elevators, or chatting over cocktails, I constantly heard discussions being carried on in German, Italian, French, Spanish and various dialects of English (usually of the Australian, British or South African flavor).
The hot topic powering many of those conversations was China – specifically, the potential for Chinese passenger car exports to the U.S. That looming possibility was on just about everyone’s mind, adding one more layer of uncertainty to an already unsettled dealer environment.
I had the good fortune to meet several importers who have been importing Chinese vehicles for several years now – to places like Chile, Guatemala and Colombia. Several major importer/dealers – including one who has more than five years experience with four different Chinese brands -- provided J.D. Power with some interesting insights about their experiences with Chinese autos to date.
Those conversations provided some real world feedback about the readiness of Chinese autos for world markets. Here are a couple of brief observations from people with experience:
Vehicle quality: In general, passenger cars imported from China need more preparation work – detailing and fit-and-finish adjustments – than their counterparts from Japan and Korea. This adds time and expense to the importer’s operation. The importers I spoke with felt that the lower prices of Chinese vehicles were generally accompanied by overall quality that failed to match the standards of competitor’s vehicles.
Warranty: Only one of the four Chinese companies offered any type of warranty on the vehicles being imported. As a result, importers have to offer their own warranty, at their own expense, usually for one year or 15,000 kilometers. By comparison, other Asian manufacturers typically offer warranties of 2-3 years, and between 30,000-50,000 kilometers.
Spare parts: Two importers I spoke with said that spare parts for Chinese vehicles are generally difficult to order and priced generally higher than competitor spare parts due to shipping charges. In addition, they complained that spare parts catalogues are often incomplete and do not include pictures of the parts being ordered. When wrong parts are ordered due to misunderstanding in language or ambiguity in the parts catalogue, it is difficult to return the spare parts to the manufacturer.
Vehicle shipping costs and vehicle price: Because most Chinese vehicles are exported in small allotments, they are shipped in containers rather than in special purpose-built ships that allow for roll-on and roll-off transportation. This adds more cost to the import operation – in some instances pushing the price of the Chinese vehicle above its non-Chinese competitors.
Exclusive agreements: While one importer I met said he thought had an exclusive import and sales agreement with a Chinese manufacturer, he found that the definition of “exclusive” wasn’t exactly what he’d anticipated. He was surprised, to say the least, to see his local competitor at the port receiving vehicles off the same ship that he was meeting. He was told by his Chinese vehicle supplier that his competitor’s agreement was non-exclusive, which allowed the Chinese manufacturer to sell to both companies.
Despite these initial challenges and misunderstandings, none of the South American vehicle importers I met with plan to completely abandon their relationship with Chinese manufacturers. It is still early in the game, they say, and the potential for Chinese vehicles – once volumes grow and the Chinese become more experienced – is just too great to walk away from.
Volumes are certainly growing at an exponential pace. China exported some 185,000 passenger cars worldwide in 2007, up from about 105,000 units in 2006, and just 35,000 units in 2005.
Concluded one importer: “I have stopped doing business with three [Chinese] brands, but I am building up my business with the fourth. They make a good vehicle; it is easy to operate, and easy to repair. Demand is high, and we are making good profits, so everyone is happy.”
As that kind of experience becomes more common, I fully expect to hear an increasing number of Chinese conversations joining the buzz during future NADA shows.
Written By Timothy Dunne