China becomes auto power

Associated Press

China’s auto industry has come a long way since General Motors Corp. set up its first factory here in a brand-new industrial zone in Shanghai just over a decade ago.

With monthly vehicle sales topping those in the U.S. so far this year, China is now an auto power in its own right — though foreign joint ventures still dominate.

A reported move by GM to export cars built here to its home market in the U.S. could be just as important to the local industry’s own global ambitions as it is for General Motors’s survival, industry experts say.

“China is on its way to becoming the world’s largest auto manufacturer. It will be nothing out of the ordinary to see cars with a ‘made-in-China’ label selling in global markets,” said Li Chunbo, chief analyst at Citic Securities in Beijing.

Media reports that GM intends to increase sales of cars made outside the U.S., for the first time importing autos made at its Chinese factories with partner SAIC Motor Corp., spell political trouble given GM’s reliance on billions of dollars in U.S. government support.

Union leaders have said it is wrong for GM to take taxpayer money to outsource jobs overseas.

GM has said little. Presumably, Chinese-made cars would enable GM to cut costs, and in the hyper-competitive global auto world of crippling labor costs and shrinking profit margins, any advantage counts. American automakers already rely on components made in China to save on costs.

“GM is reviewing various options,” its China office said in a written statement. “We are not discussing details of our future portfolio, beyond what we have disclosed in auto shows and our viability plans.”

In a presentation GM provided to some congressional offices, the automaker said it plans to import 17,335 vehicles from China to the U.S. in 2011 and 38,351 in 2012. The number of imported vehicles from China is expected to grow to 53,302 in 2013 and 51,546 in 2014.

That would be less than 2 percent of the 3 million vehicles GM sold in the U.S. last year — about one-third of which already are made overseas.

GM imports Chevrolet Aveos from South Korea, the Pontiac G8 muscle car from Australia and the Saturn Astra compact from Belgium. The Saturn Vue, Chevrolet HHR small sport utility vehicles and several pickup truck models are imported from Mexico. Other models are made in Canada.

GM Daewoo Auto & Technology Co., GM’s South Korean unit, exported 269,718 vehicles, including kits, last year to North America.

Chinese-made cars may face quality questions from consumers concerned about defects and problems with a number of Chinese exports ranging from drugs and foods to furniture and appliances.

Japan’s Honda Motor Co. has been successfully exporting its Jazz compact car from China to Europe since 2005.

This wouldn’t be the first time a U.S. automaker has considered making China an export base.

Chrysler LLC and Chery Automobile Co., China’s biggest domestic automaker, announced plans in 2007 to produce a low-cost model in China to be sold under Chrysler’s Dodge brand in the U.S. and Europe. But they called it off last August. Apart from the fallout from the financial crisis, the companies said they needed to work on safety and emissions.

An earlier alliance between Chery and Malcolm Bricklin’s Visionary Vehicles also fell apart.

Chinese automakers already enjoy price advantages, but lag behind the global giants in technology and quality. So far, they’ve been daunted by the challenge of meeting U.S. standards. Much publicized failures of some vehicles in test crashes have likewise hurt sales in Europe, although several car makers have begun sales of SUVs and other vehicles in some markets.

“All we hear today is premature,” said Klaus Paur, Shanghai-based TNS Automotive Director for North Asia. “These export aspirations are a marketing tactic, not a real solid opportunity. But it’s certainly a possibility in the future.”

China’s own automakers should eventually compete in the U.S. market. But the changes won’t come overnight, analysts say.

“There should be one or two able to do that,” said Yale Zhang, an analyst with CSM Worldwide in Shanghai. “Not in five years, but maybe in 10 to 20 years,” he said.