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China cars won't fit Japan model

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China cars won't fit Japan model

Chinese will seek joint ventures on car sales to U.S., experts say

Christine Tierney / The Detroit News

China's carmakers are planning to break into the U.S. market like the Japanese and Koreans before them, but they won't necessarily follow the same pattern, industry experts said Thursday.

The American market is much more competitive now, and China's carmakers are relatively new to the business. Unlike the Japanese, who built "greenfield" factories, as opposed to acquiring facilities, and brought their suppliers, the Chinese "would probably be less inclined to do it all themselves," said John Casesa, managing partner of Casesa & Co.

"I'd expect a combination of greenfield and joint ventures and lots of things in between," he said at a conference in Detroit organized by the U.S.-China Chamber of Commerce.

The first Chinese vehicle imports are expected to arrive late this year when BYD Auto Co. starts shipping battery-powered, electric e6 sedans to California. The cars will be sold initially to fleet customers, said Patrick Duan, a manager at BYD's North America export division based in Chicago.

BYD, a battery manufacturer that recently branched into the car business, is considered to be one of the most promising Chinese firms. It counts Warren Buffett among its investors and Daimler AG as a venture partner.

Many Chinese carmakers have ties with foreign-based companies, which are allowed to assemble vehicles in China only in joint ventures with domestic companies.

"They've already established relationships with many foreign manufacturers," said Thomas McGuckin, a partner at consulting firm PricewaterhouseCoopers. "They'll be able to leverage that when entering the U.S. market or the European market."

In the 1980s, when Honda Motor Co. and Toyota Motor Corp. built their first North American assembly plants, they were designing and producing very competitive vehicles.

But the Chinese don't have comparable capabilities, industry analysts said, although they're improving very fast.

"I think we'll see many Chinese companies selling cars here and a pretty high rate of failures because this is a very competitive market," Casesa said.

The arrival of the Chinese may present opportunities for U.S. manufacturers and Michigan's in particular, said Wayne County Executive Robert Ficano.

Ficano is setting out on his sixth trade mission to China to try to attract manufacturing investment to Michigan. "The engineers, the R&D centers, the talent," he said, "it's all here."

From The Detroit News: http://detnews.com/article/20100611/AUTO01/6110372/1148/auto01/China-cars-won-t-fit-Japan-model#ixzz0qY5lTKMi

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