China's Fast-Moving Vehicles

Mel Rapton doesn't know how to pronounce the name of the Chinese company whose automobiles he would like to import and perhaps sell at his Honda dealership in Sacramento, Calif. He doesn't know what styles he'll promote, what he'll charge or how exactly he'll persuade Americans to buy a car made in China—one that isn't a Hot Wheels toy, that is.

Rapton does know that when he took a tour of the Hebei Zhongxing Automobile factory south of Beijing last November, he watched workers weld vehicle components together by hand—an assembly scene out of the '50s. But after his son test-drove a few models, Rapton started to think he could sell China's cars in the U.S. Setting aside doubts about Hebei's quality control, he signed a "memo of understanding" to negotiate an import deal. "It might take them a year or two to get started," he says, "but I'm willing to take my chances."

Slide over Hyundai—the next automotive upstart that takes the wheel in the U.S. will probably be Chinese. In Detroit this week, a small company called Geely (pronounced Jee-lee) will be the first Chinese automaker to display a car at the North American International Auto Show. Unveiling the compact sedan, whose name translates as Free Cruiser, is a bit of a stunt since Geely may be a couple of years away from shipping products to the U.S. Yet the company has big plans, aiming to export 1.3 million vehicles worldwide, including small sedans for less than $10,000 and a sports car, the Beauty Leopard, which sells for $15,125 in China. Other Chinese manufacturers, with varying levels of sophistication, are developing export models too, notably Chery, which is being promoted by Malcolm Bricklin, a New York City entrepreneur who made his fortune importing Subarus and his name importing the ill-fated Yugo. "What you're seeing is the first stage," says Mike Hanley, global director of Ernst & Young's automotive practice. "Everybody recognizes that Chinese cars will end up in North America. It's a matter of time."

And what a lousy time for U.S. automakers, struggling under competitive pressures that the Chinese are only starting to experience. Chery is developing a full line of vehicles, from compacts to SUVs, shooting for a 2007 launch. And those aren't Chinese Yugos. At the 2005 Shanghai Auto Show, Chery unveiled a convertible with a retractable hardtop, designed by Italy's Pininfarina studio, that won the award for best new car. Yale Zhang, an industry analyst in Shanghai with CSM Worldwide, an automotive consulting firm, says he expects Chery to begin exporting a minivan and a four-door sedan next year. Chery recently cleared two hurdles: settling a law-suit with GM over charges that it ripped off a design from GM's Daewoo subsidiary, and agreeing to find a new name for North American models—since Chery sounds like Chevy, GM had threatened to press the matter in court. Bricklin, meanwhile, claims to have signed up more than two dozen dealers. Chery plans to sell cars up to 40% below current market prices. That will help buyers get past the jokes that their Chinese cars may not make it off the lot, the same jokes once aimed at Japanese brands.