Foreign invasion of cars looms

Foreign automakers will get one shot at cracking the U.S. auto market.

Toledo Blade

Autoworker Seth Vineyard knows that the day is coming when he will sit at a busy intersection in his Chevy pickup and be surrounded by unfamiliar vehicles from the far-off reaches of the world.

“It makes me mad,” said the 31-year-old skilled trades worker who is laid off from General Motors Corp.’s Powertrain plant in Toledo. “I don’t think a lot of people understand how much money they’re taking out of our local economy when they buy one of these foreign cars.”

An invasion is coming over the next few years to American shores as a weak dollar and the world’s biggest automotive market entice automakers from around the world to bring their vehicles to the United States.

Like any invading army, some foreign vehicles will establish a beachhead, and others are likely to be mowed down by fickle and sophisticated American consumers.

“The U.S. market continues to be the largest auto market in the world. If you can penetrate the U.S. market, you can sell anywhere,” said Albert Gallegos, director of international affairs for the National Automobile Dealers Association.

“But the market is a little bit unforgiving. You have one shot. You have to have flawless execution, or you’re not going to get a second chance.”

The first drops of the coming wave of new vehicles are splashing on shore.

UIn January, SmartUSA, a European company owned by Daimler AG, began delivering the first several thousand of its two-seat Smart fortwo.

UThis week, Indian automaker Mahindra & Mahindra Ltd. will begin production in India of two pickups and a sport utility vehicle for the U.S. market. The vehicles are expected to make an appearance at an industry event next month in Detroit and to be in showrooms in the summer of 2009.

UFiat SpA has revealed it planned to reintroduce its Alpha-Romeo brand to the United States by building a plant, probably in Mexico. The company wants to bring its European economy car, the Fiat 500, back to America.

UChamco Auto, shorthand for China America Cooperative Automotive Inc., said it plans to import Chinese-made pickups and SUVs into the United States in 2009. The vehicles will be made by Hebei Zhongxing Automobile Co. Ltd.

UChrysler LLC is working with China’s biggest automaker, Chery International, on a small-car line to be built in China and exported to America.

There were 16.2 million vehicles sold in the United States in 2007, of which about a quarter were made in Japan, Europe, or Korea, according to Automotive News, a trade publication.

But some industry analysts are skeptical of claims that the North American market is ready to be flooded by vehicles from abroad.

“There’s a very big difference between saying you’re going to sell cars in the United States and actually doing it,” said Aaron Bragman, an auto industry analyst for the consulting company Global Insight Inc. in suburban Detroit. “The quality levels, refinement levels, safety levels for these vehicles are still quite a bit under what Americans will expect.”

Reports of a “Chinese invasion” of inexpensive automobiles have circulated around the auto industry for years. But so far, there’s little sign that large or small Chinese auto manufacturers are ready to hit American shores. Their biggest problems: quality and emissions.

All foreign imports must meet safety, emissions, and other U.S. standards set by the National Highway Traffic Safety Administration and the Environmental Protection Agency, among others, before they can be sold in the United States. Experts said approval can take years.

“You sit in a [Chinese] car, and they’re just not ready,” said Stephanie Brinley, an analyst with AutoPacific Inc., a consulting firm with offices in Southfield, Mich., that tracks the auto industry. “They don’t yet meet U.S. safety standards, and that’s a bit of a problem if you want to sell cars here.”

Most of the new vehicles destined for U.S. shores in the coming years are very small cars, compact pickups, and sport utility vehicles.

Although the total number of vehicles sold shrank in 2007, sales of many smaller models like the Ford Focus, Chevrolet Aveo, and Toyota Yaris increased.

Each of the three small car models is priced starting at $12,000 to $14,000, and they are far less profitable than larger vehicles.

Entering the U.S. market can be a daunting challenge for a foreign automaker, but it can have big payoffs for automakers that can deliver profitable vehicles that U.S. customers want, Brinley said.

“It’s all about price. That’s where they have to compete,” she said. “And they have to make sure that they are selling their vehicles at a profit. Most of these companies can’t afford [loss leaders].”