Don't Bet on Seeing Chinese Brands in the U.S. Anytime Soon
Over the past decade, regular reports that Chinese automakers were readying a major push into the North American market became commonplace. We started seeing them move out of trade show basements to take up some of the most desirable real estate on the main floor. While some of the product clearly wasn’t yet up to snuff, one could imagine budget-focused products flooding the U.S. and Canada after a few years of polish. However, the last time that seemed like a likely scenario was 2018.
Chinese brands are still trying to break into the untapped North American market; some even have physical office space set up within the United States. However, Sino-American relations have soured dramatically over the past few years, and new financial hurdles have made wrangling a new market extremely difficult.
One could argue that Chinese automakers have already achieved their goal of breaking into the United States by nature of Zhejiang Geely Auto Group owning Volvo Cars since 2010. Of course, Volvo is a Swedish brand with a Chinese parent, and we’re talking about overtly Chinese brands starting from scratch — meaning we also can’t count General Motors’ Chinese-made products, either.
While we’ve seen a lot of big talk from China’s long list of electric vehicle startups, it’s been the large firms with the big bucks that seemed the most-likely candidates for landing upon our shores. The only EV companies that managed to even get close to building and selling an actual product were firms like Faraday Future — an “American” company baked by the same Chinese investor responsible for LeEco’s failed automotive push. FF’s history is quite bizarre and includes numerous missed payments, while false promises basically destroyed it. Its once-impressive prototype is quickly becoming noncompetitive, the founder declared bankruptcy in 2019, and it’s now part of a joint venture with Chinese online game purveyor The9.
That leaves the big boys as the most likely to come to the states. GAC said it wanted to, staging appearances at several U.S. trade shows before saying it needed to refocus on its home market. Geely has expressed an interest in bringing Lynk & Co to the U.S. too — specifically the connected, Volvo-esque EVs it already sells in Asia. Chery and Zotye are also interested in breaking into North America and are part of HAAH Automotive Holdings, an import firm hoping to sway U.S. dealers to sell their wares. But it’s no longer pushing Zotye as a brand.
According to the latest from Automotive News, HAAH will instead focus on Chery while Zotye contends with financial troubles and dwindling sales on the home front. The plan was to sell one or both brands under a single banner intended specifically for the American market, called Vantas. Troubles within China’s economy has forced HAAH to back the healthier-looking horse. “Zotye took an enormously big hit in China,” HAAH CEO Duke Hale explained. “They have to focus on home and get that turned around.”
“We still are good friends of Zotye,” he continued. “We’re still working with them. We’re going to work with them in Central America. And we have a long-term agreement with Zotye to bring their vehicles to the U.S. market — when it makes sense to do so.”
By Hale’s estimation, Zotye would need a minimum of two or three years of growth before it could be considered for exportation to America. Brand sales dipped over 25 percent in 2018 and fell by 50 percent (vs the previous year) in 2019, making the lofty financial commitment needed to enter the U.S. unrealistic.
Chery also faced hardships as China’s automotive landscape found itself confronting a brick wall. Growth stopped years before most thought that could even be a possibility. Still, it’s a huge company, starting out as state-owned and looking every bit like the most secure of the bunch. Chery likewise saw sizable sales declines in 2019, however, and had trouble maintaining export volumes even before the pandemic.
As big as the financial hurdles appear to be, we don’t believe it’ll be the thing that prohibits Chinese brands in North America — rather, it’s the social and political aspects of the situation that threaten the potential market entry
While Canada seems fairly friendly with China, at least according to its Prime Minister, its population has grown cautious. Meanwhile, the United States’ rhetoric has grown increasingly hash toward the Chinese Communist Party. Responding to criticisms of China’s borderline nonexistent intellectual property laws and unfair trade practices, the U.S. enacted aggressive tariffs that spilled over into a full-blown trade war. China’s handling of the coronavirus and its apparent influence over the World Health Organization worsened relations this year, only to be capped off by its passing of new security laws for Hong Kong that America says stripped the formerly democratic island of its autonomy.
The point is, tensions are rising, and it’s not just the United States that’s banning access to Chinese mega corporations — like telecom provider Huawei — on national security grounds (spying, basically), or growing increasingly critical of the way its businesses operate. Australia, which has strong economic ties to the region, has also begun to turn its back on China and appears to be entering into a trade war of its own. Canada also broadly backed the U.S. decision.
We’ve begun to get the feeling that no one in our geopolitical circle is super hot for China at the moment — especially compared to just a few years prior. And if the United States follows its current path, we doubt Chinese automakers will be allotted much space in North America anyway. President Donald Trump has been pretty keen on manufacturing being brought stateside, so any real hope of any overtly Chinese cars being sold here probably hinges on their also being built here (which takes much more cash up front). And if the U.S. puts the kibosh on Chinese autos, then there isn’t much point in trying to sell them to a smaller number of Canadians.
That’s assuming Trump wins the next election.
Then again, even with someone new in the White House, many issues involving China we were previously blind to will persist. Even if HAAH gets Vantas off the ground, customers may not respond. Political tensions could negatively impact sales as more Americans seek to buy products from friendlier-looking countries. But a good bargain can still turn heads and Chery’s low-cost options could be just the ticket; many may not even realize Vantas is technically a Chinese brand. Masking the point of origin is something China is exceptionally skilled at — be it a virus or the countless air conditioner units your author was browsing this past weekend.
Don’t discount Chinese brands just yet, but don’t assume they’ll be able to make it to North America anytime soon, either. While we may be able to revisit the idea next decade, anything within the next five years seems out of the question.
Schmitt trigger on Jun 02, 2020
The only way I can see that Chinese-branded vehicles won't make it to these shores sometime in the future, is if its Politburo decides to do something rash, like invading Taiwan. Maybe if they do it incrementally, like they have been doing with Hong Kong, they could get away with murder.
Speedlaw on Jun 02, 2020
My limited exposure is to Great Wall and Chery while visiting sunny islands...they get a lot of these cars second hand. I don't think they'd sell in the US, it is between 70's Fiat and 80's 1st gen Hyundai with a dash of Volga. Like a Lada, probably a good fit for the market, but not a good fit for the expectation of North Americans.
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