How much does a Chinese brand need to discount its cars to make it in America? Wu Song, general manager of aspiring U.S. entrant Guangzhou Automobile Group Co., says he has that magic number: His cars have to be 30 percent cheaper.
The company's top executive already is on the prowl for U.S. dealers, importers and distributors. And if everything goes his way, Wu says he'll be testing his basement bargain pricing strategy with the U.S. launch of GAC Motor's GS4 crossover sometime in 2017.
"We are confident. It could be popular in the market," Wu told Automotive News at the Shanghai motor show. "Considering the low price, it should be competitive."
GAC is the latest China automaker to float plans to sell made-in-China cars in the U.S., following similar pronouncements by Great Wall and BYD. Skeptics often titter at such goals, noting the many Chinese brands that have pledged to be Stateside in two or three years. But GAC's disclosure shines a light on the pricing calculus they are working with.
With no true bargain brands left in the United States, Chinese brands see room to underprice the competition and gain a niche below rivals such as Kia, Mitsubishi and Dodge.
GAC's goal will be sticker prices that are 30 percent lower than competitors in the same segment, Wu said.
The GS4 represents the latest that GAC has to offer. On April 18, it was launched in China with prices ranging from 99,000 to 146,800 yuan ($16,200 to $24,100). GAC aims to sell 120,000 units a year.
In the United States, the compact crossover would go up against such entries as the Toyota RAV-4. Toyota's nameplate starts at $24,565 including shipping, just above the GS4's upper limit.
But Wu says his offering boasts better fuel efficiency, more power and a roomier interior. It consumes 6.3 liters per 100 kilometers under China's testing cycle, Wu said. While that can't be directly converted to an EPA rating, it equates to about 37 mpg. The RAV-4 gets a combined 26 miles per gallon.
"This car bears no relation to Toyota," Wu said. "Only the assembly technology is similar."
Wu said he is "90 percent confident" that GAC will bring the GS4 to the United States, but first the company needs to sign on dealers and importers. "The most important thing is finding a partner," he said.
It will be difficult for any unknown brand, no matter where it is from, to crack the U.S. market because it is saturated with so many established brands, said James Chao, managing director for Asia Pacific at IHS Automotive.
Meanwhile, a 30 percent "China discount" is smaller than the markdowns of up to 40 percent that China brands are already relegated to against global brands in their home market, he said.
"My initial reaction to the 30 percent is that it's way too small," Chao said. "I'm not optimistic. It's a real challenge for an unknown brand with an unknown track record."
Still, some U.S. dealers might roll the dice on the brand, possibly putting GAC's car up against used vehicles with a deep discount and warranty, Chao said.
A better U.S. entry strategy, he added, might be that of China's Zhejiang Geely Holding Group Co.
In 2010, Geely acquired Volvo Car Corp. and now plans to export a Chinese-made long-wheelbase version of the Volvo S60 sedan in the U.S. this year. Geely then might be able to steal into the U.S. market under Volvo's premium mantle, without going the cheap route, Chao said.
GAC has had its eye on the U.S. for awhile, with exhibits at the Detroit auto show in 2013 and 2015. This year, it showed the GS4 and an autonomous hybrid concept.
A major state-owned automaker, GAC operates manufacturing and sales joint ventures with Toyota Motor Corp., Honda Motor Co., Fiat Chrysler Automobiles and others.
In December, a company press said it "hopes to seek tie-up and cooperation with international counterparts at the Detroit auto show to fine-tune its production and research capabilities to make better energy-efficient cars in the future."
Hans Greimel
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