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China wants to enter the U.S. car market, but a rough road lies ahead

Russ Mitchell, Los Angeles Times on

Published in Automotive News

But China's rise in production volume and quality has been breathtaking. A minor player as recently as the late 1990s, when it sold about 2 million vehicles, almost all of them in China, the country is now the world's largest automobile producer. In 2017, 25.4 million passenger vehicles -- the vast majority made by Chinese automakers -- were sold in China, according to LMC Automotive. (In the U.S., 17.2 million vehicles were sold last year from U.S., Asian and European manufacturers.)

As state-owned car companies entered into joint ventures with U.S., European, Japanese and Korean companies, production surged and quality improved. Meanwhile, leaner, meaner private Chinese companies such as Geely are turning up competitive pressure.

GAC's U.S. foray will test Chinese government ambitions to become a world-class, high-quality exporter of essential goods and services. The government's Made In China 2025 plan, released in 2015, identifies 10 key industries, motor vehicles among them, with an emphasis on electric cars and trucks.

Incentives and mandates issued from Beijing and local governments, including polluted mega-cities such as Shanghai, have boosted electric vehicle growth.

Electrified vehicle sales expanded 53 percent in 2017, to 777,000 vehicles, said the China Assn. of Automobile Manufacturers -- 652,000 all-electric vehicles and 125,000 plug-in hybrids.

In the U.S., almost 200,000 EVs and plug-in hybrids were sold last year, according to Inside EVs, up about 25 percent. While mass consumer demand for EVs remains tepid, automakers have launched ambitious electrification plans. A bill to require zero tailpipe emissions for all new vehicles sold in California by 2040 is in the legislative hopper.

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Although EVs are rising fast in China, overall passenger vehicle sales are flattening out -- up only 2.8 percent in 2017, compared with a 15.5 percent increase the year before.

That puts pressure on Chinese automakers to expand to new markets. Success in the U.S. will translate into more sales back in China, said Mark Wakefield of the consulting firm AlixPartners. The idea: If U.S. customers embrace a China-made car, it must mean the quality is high.

"Competition in China is tough and getting tougher," he said. "There's a premium for a brand that comes with a 1/8U.S.3/8 stamp of approval."

If GAC succeeds with a 2019 U.S. launch, it won't have the China-made market to itself.

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