By on May 4, 2011

 

For years now the Chinese automakers have been the bête noir of the global car industry, inspiring equal parts fear and contempt in boardrooms and editorial meetings from Detroit to Stuttgart. In an industry built on scale, China’s huge population and rapid growth can not be ignored as one scans the horizon for dark horse competitors. And yet no Chinese automaker has yet been able to get even a firm toehold in the market China recently passed as the world’s largest: the United States.

Certainly many have tried, as the last decade is littered with companies who have tried to import Chinese vehicles, only to go out of business or radically rethink their strategy (think Zap for the former and Miles/CODA for the latter). Others, like BYD (or India’s Mahindra), have teased America endlessly with big promises of low costs and high efficiency, only to delay launch dates endlessly. In short, a huge gulf has emerged between overblown fears of developing world (particularly Chinese) auto imports and the ability of Chinese automakers to actually deliver anything. No wonder then, that we found what appears to be the first legitimate attempt at importing Chinese cars to the US quite by accident…

The internet is an amazing thing: on any given day you literally never know what you’re going to find. Typically when I find a story that shows promise as a TTAC post, I open a few tabs in a new window and search for words and phrases associated with that story in hopes of finding related reporting and greater context. And sometimes those searches lead to a story that’s infinitely more interesting than the original idea that lead to them.

A few days ago, for example, an Automotive News [sub] story about Wheego Electric Cars Inc caught my eye. The firm, which imports Shuanghuan Noble gliders and converts them to electric power using US suppliers, sold its first retail vehicle last Earth Day (April 22), but AN [sub]‘s piece was hardly the puff piece you might expect from such an opportunity. Instead, the industry paper reported that Wheego was out of money and had retained a VC outfit to raise cash, even quoting CEO Mike McQuary as saying

My constraint is primarily capital. We’ll be living hand-to-mouth as we try to get the first cars built. The next 200 will creep out as we raise money.

It’s the kind of story that appeals to TTAC’s occasionally vulture-like editorial instincts, as I know that more than a few of TTAC’s readers would probably get a schadenfreude-laden chuckle out of the struggles of a firm trying to sell an electrified Chinese Smart Car clone for “$33,995, including shipping” (before $7,500 federal tax credit). But after a little bit of digging through the search results for “Shuanghuan” (looking for mmore background on this Hebei Province-based automaker) I came across a website that I hadn’t expected to find: www.shuanghuanofdesmoines.com. Never having seen anything resembling a Chinese-branded dealership in the US, I clicked over.

There, I found a website titled “Shuanghuan Auto,” advertising two versions of the Noble and the SCEO (neé CEO) SUV… with an Iowa address. A glance at TTAC’s archives showed one incredulous write up from Bertel two years ago, and little else to explain this unexpected find. The Noble G4 was advertised as having gasoline (1.1 liter Suzuki design, made in China) or electric options. The SCEO was shown with a 2.4 liter Mitsubishi engine or a 2.5 liter “Yuchai” turbodiesel. I briefly checked the EPA website and, finding no signs of “Shuanghuan” or “Yuchai,” I dialed the number on the website and a day later I spoke with the owner of Shuanghuan Auto Des Moines.

Gene Gabus lives up to the finest Iowan standards of friendliness, instantly warming my expectation-free cold call with immediate candor. “I don’t know if you realize this,” he says, “but it takes a ton of work to get these cars up to American market standards.” As it so happens I had heard that it was tough to import cars to the US, and soon Gabus is explaining the extensive re-working that was needed to bring the Noble’s fuel system and rear-crashworthiness up to snuff. “We’re just working on the advanced airbag system now,” he says. Having seen a Noble crash test and been impressed by everything but the fact that there didn’t appear to be any airbag, this sounded promising. He describes extensive fuel tank modifications and says that dual-fuel figured heavily into US market plans. “You’ve heard of CNG cars?” he asks. I had. This was becoming even more interesting.

“Why have I barely heard of you guys?” I ask. “We’re used to hearing a lot of hype from importers of brands like Mahindra and BYD.” “Well,” he answers, “the feds don’t like a lot of talk before they approve a vehicle. Besides, we’ve watched the other guys talk a big game and fail to deliver. We want to avoid that.”

“And you are a former Chrysler dealer?” I ask. The address had been listed as Des Moines Chrysler on Google Maps. “Did you lose the franchise during the bailout?” There’s a brief pause. “I was robbed,” he growls. His profitable dealership had lost its franchise, while a pair of smaller local competitors had kept theirs. It’s clear that the wounds are still fresh, but they haven’t stopped Gabus from diving into a full-on attempt to homologate Chinese cars for the US. I press him with more questions. “Look,” he says, “let me give you Bob Smith’s number. He’ll be able to answer all of your questions.”

Sure enough, Mr Smith answers my first phone call, and in short order is answering my questions in a warm, Southern drawl. “I’ve done business in China since 1985,” he explains. “Computers, wheelchairs, that kind of thing.” And why cars? “I’ve seen how China is growing,” he explains. “I’ve seen their demand for gasoline grow and grow. Supply won’t keep up with their growing demand, and we’ve seen what happens when gas prices approach $5/gallon. People begin to seek out alternatives.”

Smith and Gabus plan on selling gasoline and electric-powered versions of the Noble, but the centerpiece of their plan involves dual-fuel version, which run on gasoline or Compressed Natural Gas (CNG). Like many people who have spent a lot of time around the car industry, Smith and Gabus are skeptical about all the hype surrounding electric vehicles, and given that most importers of Chinese vehicles focus on electric conversions, this puts them in a unique position relative to their competition. Smith waxes enthusiastic about the low prices and high supplies of natural gas in the US, and says the key to his business case is the relatively low cost of natural gas conversions.

“Look,” he says, “batteries often cost as much or more than the car itself.” The struggles at Wheego, which has split homologation costs with Smith and Gabus’s Shuanghuan importation outfit (Smith calls Wheego “good guys”), fill in all the necessary details. An electric Smart clone might appeal to hard-core greenies, but at $33k, their chances of mass-market acceptance are slim. Like Wheego, Smith is banking on help from the federal government in order to break into the market, but unlike the EV hawkers, his natural gas focus helps avoid the trap of having to sell a low-cost car at high prices.

“We expect the Pickens Plan to pass this summer,” explains Smith, referencing the natural gas subsidy bill that’s been championed for years by natural gas baron T. Boone Pickens, and was recently re-introduced and endorsed by the Obama Administration. “When that happens, people will be able to build home refueling stations which tap into their home heating natural gas lines and they’ll receive a $2,000 tax credit to install it.” But that’s just the beginning. Under the Pickens Plan bill, light duty vehicles (powered by natural gas or dual-fuel) would be eligible for a $7,500 consumer tax credit, the same amount currently available to plug-in vehicles.

It’s starting to add up. Not long ago, Edmunds CEO Jeremy Anwyl called for parity between EV and natural gas tax credits, and Honda has recently announced 50-state sales of its natural gas Civic GX. These guys are surfing a building trend. “So,” I ask, “what price point are you targeting post-tax credit?” His answer drops my jaw: “$4,000 to $5,000,” he says. I suddenly get it, and I’m floored by the idea. Low-cost, high-efficiency Chinese cars that sell at a price that’s less than half of the cheapest gasoline-powered cars on the marketplace. This is the kind of plan that has had the industry terrified, and yet has yet to be seriously pursued. And here are a couple of guys, flying under the radar, bringing a truly disruptive Chinese import to market… in Des Moine, Iowa. You can’t make this stuff up.

At this point, I stop thinking of Smith and Gabus as underdogs (or possible hucksters), and start thinking of them as a couple of shrewd operators. But, says Smith, the plan is still a huge gamble. They’ve already spent millions crashing some 32 Shuanghuan Nobles, and upgrading their bracing, fuel tanks, evaporative emissions control systems, advanced airbags and seatbelts. Having been working with the EPA and DOT for two years already, Smith confirms that he expects full DOT/EPA approval by the end of the second quarter of this year… within the next two months (Wheego has reportedly already received DOT crash-test approval). The SCEO SUV has not yet started testing, he says, and the process will take two years, so they’re starting with the Noble. Even with a crazily low targeted price point and high natural gas efficiency, there’s no guarantee that the Noble will take off. “But,” says Smith, “you have to take a chance and put some money on the table if you want to change anything.” And rather than trying to make the cover of every green magazine in the country, Smith and Gabus have started with the tough task of homologation… and now they’re almost done. Their huge bet is about to hit the table.

Before getting off the phone with Smith, I ask when he’ll next be in Des Moines. I explain that I want to meet him and Gabus at Shuanghuan Auto Des Moines, drive the Noble, and hear more about the origins of their import scheme, as well as their plans for the future. “Sure,”he says, “I’ll be there in June.” “In that case,” I reply, “so will I.” This story, which has flown below the media’s radar for two years now, is starting to take off… and TTAC will be there to cover it. By June, EPA and DOT approval should be rapidly approaching, and Smith and Gabus will be approaching the next challenge: pricing and selling these tiny Chinese cars. If the Pickens Plan passes and they’re able to hit their price points (both still “ifs,” the men admit), these industry outsiders could put Chinese cars –and Des Moines, Iowa– on the automotive map in this country. In an industry with seemingly infinite barriers to entrants, that’s a huge story… and one we’ll continue to cover.

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32 Comments on “The Chinese Are Coming: Part One: A Tale Of Two Nobles...”


  • avatar
    SVX pearlie

    This would actually work. It’s smart, and it’s very different.

  • avatar
    Felis Concolor

    A pissed-off former Chrysler dealer, a man in his 3rd decade of dealing with Chinese businesses and a mini car with a price point to match its size – and that’s before the tax credit. File this one in the “they never saw it coming” folder.

  • avatar
    todo76

    I think CNG is a good way to go with what little I know about it. Plus, seeing our ‘big’ three get a backhand across the face from this little upstart would be a lot of fun.

    Now they just need to work on the name. How in the hell do you pronounce Shuanghuan anyway??

    • 0 avatar

      I rode CNG taxis and talked to leaseholding drivers. They say the operations are not stenous, the cars easily last 300,000 miles. However, the network of filling stations is inadequate and if you manage to run out of gas, it’s a tow truck time. I may be wrong, but apparently LNG cannot be substituted for CNG, even if the fuel system had an emergency inlet.

      • 0 avatar
        HerrKaLeun

        LNG is actually cooled to methane boiling point (-260°F), as it is done on LNG tank ships coming from all over the world. so you need a cold setup and an insulated tank. If you car would use LNG, over time it would get too warm and tear apart the tank.

        CNG is just compressed (still gas) natural gas and the cooling is not needed.

        so naturally a CNG car doesn’t have insulation to keep the gas at -260°F.

        I think LNG is only used for transport in ships and the ship engines use the evaporated LNG (even a huge insulated tank warms up eventually). It takes much energy to compress natural gas, but even more to liquefy it. My last refrigerator providing -260°F was pretty inefficient rejecting heat to 70°F ambient temperature :)

      • 0 avatar
        Athos Nobile

        They’re going to power the car with both fuel. If I read Edward correctly, those will be bi-fuel, not CNG dedicated cars.

        So no CNG “range anxiety” to worry about.

    • 0 avatar
      volkswind

      I’m Chinese and the name of his company could be pronounced like “shwaang-juan”. In Chinese, this name means “double rings”, where “shuang” means double and “huan” means ring, just have another glance at the logo of this brand and you can get a better understanding of this name!
      Anyways, this is not a well-known brand in here, either. We Chinese people tend to buy those joint-venture companies’ cars, such as Audi, VW, Toyota, Honda, etc. Nearly every company has already settled in our country with its own fellow local company as a joint-venture, which is the only legal form for the companies abroad to manufacture their cars inside the country. Only Lotus, Renault and Fiat have not done this, while the latter two still do the importing, the former one had never open its market here in any possible way.

  • avatar
    fincar1

    In spite of the fact that I see the Pickens plan as a way for T. Boone Pickens to get taxpayer money, I am pulliing for these guys. Their ideas seem much more grounded in reality than those of electric- and battery-powered cars I’ve seen.

    • 0 avatar

      Pickens’ financial benefits notwithstanding, the US has such abundant natural gas that we’d be stupid not to develop that energy resource. I’d love to find a dual fuel Ford Contour (a lot of state level gov’t agencies used them), and put as many SVT go fast parts on it that will bolt on.

    • 0 avatar
      SVX pearlie

      As resource subsidies go, CNG makes more sense than 40 years of failed Ethanol.

  • avatar
    blarfmarfle

    I live in Des Moines; Gabus is a well known auto dealer here, including a Ford dealership. Well, the Ford dealership is under the name Charles Gabus, but I assume Gene is related to Charles or is indeed the same person. I had no idea he was involved in importing Chinese metal, let alone making a CNG play.

    Interestingly, there was an article in the Des Moines Register recently about a judgment concerning electric car imports, and Gabus was mentioned as the dealer in charge of setting up national distribution for this: http://www.desmoinesregister.com/apps/pbcs.dll/article?AID=2011110419023 I’m not sure if this is related to the Shuanguan business.

    I’d be more than happy to help you out if you need additional on-location reporting, picture taking or help with making connections. If not, I’d love to buy you a beer when you are out here, Ed. Contact me via my email address if you want to follow up.

    • 0 avatar
      PaulE

      Actually, Gene is/was Charles’ brother, IIRC (Charles passed away a few years back at 90-some years old). I’m not sure if Gene’s operation is part of the family orbit, but that ‘group’ owns several new car stores in the Des Moines area (selling Ford, Toyota, Kia, Mitsubishi and Saab) in that market. It’s not the first time that family has gambled on relatively unknown brands; beyond Kia in the mid-90s, Charles’ store also retailed Yugos in the 80s.

  • avatar
    charly

    CNG is very mature technology as it is almost standard gasonline engine tech. It simply doesn’t need the $7.5k subsidy like battery powered cars.

  • avatar
    MoppyMop

    The build quality on these has to be absolutely abysmal, given that the Smart is already a cheap piece of crap without any Chinese involvement. Of course, for $5000, nobody will care.

    • 0 avatar
      Pan

      A “cheap piece of crap” the Smart car is NOT. It is a very sophisticated, highly engineered purpose-built car — for dense urban use. Use it for something else, that’s YOUR problem. If GM had half the engineering in their products that is in the Smart they wouldn’t have had to be nationalized by the Government.
      Actually, here in Ottawa, Canada, I see them Winter and Summer, moving with and ahead of the traffic, and out on the highway, as well.
      When the Chinese and Indian cars do come — and they will, prepare for a cataclysmic shift. I can recall when Japanese and Korean cars were scorned. Nobody is laughing now.

  • avatar
    NN

    Quite an investment on their behalf, and they seem bright and motivated and should hopefully see some success. However, if they’re pulling for the $7500 credit, then they’re talking about a car whose price point should normally be $12,500. How much does it really cost a manufacturer to convert their cars to run on CNG? Is there a multi-thousand dollar cost increase on the conversion? For $12,500, you can buy some much better vehicles than that thing (like…a real Smart, a Versa, Accent, etc.). Theoretically, then, if the idea takes off then we may also see $5000 CNG Nissans. Sounds great as a consumer, but will bankrupt the gov’t as everyone will rush to buy them!

    • 0 avatar
      Athos Nobile

      Converting a car to CNG will usually cost around $1500-2500 including tanks. If you want to use feather-light fancy carbon fiber tanks, add another $2500.

      To properly do the CNG conversion they will have to rework the rear suspension (stiffer springs and shocks), develop a personalized kit (very easy) and perform a good calibration (nothing difficult either). The equipment manufacturer will give them as much support as needed.

      If they went through the hassle of car homologation, that will be a piece of cake.

  • avatar
    philadlj

    Wow, no one so far has come out to defend Daimler’s IP?

    Whoever makes or imports the Noble, and however it’s powered, one fact remains: This is a blatant and shameless near-carbon-copy of the Smart ForTwo, and I highly doubt they’ll get away with selling it in the states for long, unless Daimler is really nice and decides not to fight them:

    http://www.autoblog.com/2007/08/21/mercedes-may-sue-over-chinese-smart-clone/

    Shandong Huoyun got in trouble in ’06 for doing the same thing, though their clone was a little more blatant:

    http://carscoop.blogspot.com/2006/11/chinese-smart-fortwo-copycat-gets-boot.html

    • 0 avatar

      Not that I want to defend China’s rather interesting approach to intellectual property (the same folks who make your product will sell knock off out the back door), but if the Noble is a “near-carbon-copy” of the smart fortwo, the only way Shandong Houyun could be “more blatant” would be if Shandong actually made a carbon copy.

      Speaking of carbon-copies, when was the last time you actually handled a copy of something made with carbon paper? I’m old enough that I actually knew how to set up and run a mimeograph machine? Remember mimeographs?

      A few months ago I was at the National Automotive History Collection of the Detroit Public Library researching Andrew Johnson, the father of American auto body design. Johnson offered a correspondence course and the NAHC has an original copy of that course, complete with Johnson’s original cyanograph reproductions (I think they were made using a process similar to how blueprints were reproduced – the blue color a result of cyano compounds). From the notes, it appears that Johnson would mail either a cyanograph copy or the original artwork to the student, who would then return his homework with the original.

      I took digital photos of everything in the NAHC’s Johnson collection. When I get the chance, I’ll make a pdf of the course.

      Among Johnson’s students were three of the Fisher brothers and Billy Durant.

    • 0 avatar

      Re: Daimler’s IP, the Greek courts have defended the Noble.

      But here’s a wrinkle from Autobild: Apparently Shuanghuan is allowed to sell the Noble in Europe as a gas-powered car, but not as an EV. Daimler actually got to destroy a Wheego-modified electric Noble that was being privately imported to Germany. Yet another reason the Smith/Gabus CNG plan seems like a smart one.

    • 0 avatar
      SVX pearlie

      A near copy isn’t a copy, so there’s no IP infringement. NONE. NADA. ZILCH.

      The Germans see IP infringement like Microsoft, the RIAA and MPAA do – under every bush and in every tree. It’s mostly fake and phoney.

      For design copyright infringement, the bar is very high, and short of a pure copy, it’s not going to stand up in an American court of law. All it takes is a few tweaks across the board, and the design is non-infringing.

      If you’ll note, this kind of thing only works in Germany, in which the court is implicitly on the take to “protect” their OEMs from competition.

      Still, I’ll be very much amused if BMW manages to get the new Civic blocked and crushed for copying their Hoffmeister kink…

    • 0 avatar

      Isn’t Noble an FWD? It sure looked that way from the video… There’s nothing where Smart keeps its engine. If so, there’s no copying going on. If anything, it’s a copy of Toyota iQ or Suzuki Maruti, if that.

    • 0 avatar
      Felis Concolor

      It will be a difficult case to prove, as the Noble is a full foot longer in addition to being wider and taller, can seat 2 more passengers, puts the engine and transmission up front – and WTF is this: different sized wheels and tires front to rear on the Smart? Silly Daimler: Big ‘n Littles are for Pro Street, not the economy circuit.

  • avatar

    Very interesting. Nice job on the reporting, Ed!

  • avatar

    Cool reporting Ed

  • avatar
    Sinistermisterman

    Very interesting story. It’s nice to see a company which is actually focusing on the fundamentals rather than puffed up hype. Cheap to buy, cheap to fuel and disposable? I can see this working.

  • avatar
    Uncle Mellow

    This is a very interesting article , but to be honest there are very few places where I would be prepared to drive around in a Smart-sized car , and the U S of A is not one of them.

  • avatar

    The cheapest Smart car, according to their web site, is $10,990. Why would I buy a knockoff Chinese clone for more than the real thing?

    If the Chinese can sell it for $5k minus subsidies, then Smart can sell it for $2,500!

    I have to admire the pluck of these guys, but Smart’s made by the Mercedes-Benz guys, and I think most people would rather have a Mercedes-derived car than one based on a Chinese car nobody’s heard of.

    The Pickens Plan is great for natural gas, but depends on wind power which I don’t think is a particularly good bet. I think Americans are getting tired of paying huge subsidies for unreliable electricity sources …

    D

  • avatar
    Athos Nobile

    I see this working. If they’re able to take off, and I’m sure they WILL since they already almost finished the paperwork, they have a money making machine in their hands.

    Reworking Chinese cars have been and is being done in Italy by DR, who sells the Chery Tiggo and some other models over there. Also, they modify the cars, and as is usual in Italy, they offer them with either petrol, bi-fuel LPG or CNG.

  • avatar

    I remember running across this place on a trip out West, shortly after visiting China. I went into the showroom floor to see a Shuanghuan Noble and the electric Ford Transit knockoff that you see in the video.

    Instantly there was one big question in my mind when I got there. “How the hell are these cars coming into the US?” You can’t mass-import cars to the US that don’t meet EPA and crash test standards, to my knowledge. The salesperson I talked to (a woman, not someone you talked to in this article) described a “final assembly” process that occurs somewhere within a few hundred miles of Des Moines.

    It clicked – these cars must be imported as “kit cars” right now – imported without drivetrains to the US. Then they are fitted with a new, US-spec fuel system for their Chinese engine/transmission, which is installed in the US.

    BYD says they’re coming to the US, but I haven’t seen any of those yet. Shuanghuan, which is a small company even in its home market, on the other hand… well I have seen three of those here.


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