Consumers have grown accustomed to inexpensive goods bearing the "Made in China" label when shopping for clothing, electronics and an array of household and commercial products.
Are Chinese automobiles set to be the next import to flood America? According to Malcolm Bricklin, one of the key businessmen leading the Chinese auto import race, the anticipated arrival will be delayed until 2008.
"I'll take it back a little,'' Bricklin told Bloomberg News of his earlier goals.
In 2005, Bricklin and his New York-based Visionary Vehicles LLC forged a partnership with China's state-owned Chery Automobile Company Ltd. Though Chery is not one of the top-five Chinese car manufacturers in size, the ambitious company is China's first auto exporter, selling cars to neighboring countries in Southeast Asia.
Bricklin, an eccentric industry veteran, had caused a stir last year when he forecasted that Visionary Vehicles would be importing 250,000 Chery sedans, SUVs and coupes to be sold at 250 new dealerships by 2007.
To date however, only 75 franchise dealerships have signed on, leaving the distribution network immature. The prototypes are also yet to be in production.
Visionary and Chery's setback is no surprise to industry analysts who expressed doubt that the company could more than triple its production capacity up to 250,000 units from 80,000 units in 2004.
Last week, Bricklin re-adjusted the initial forecasts and clarified his intended target market.
"We want the guy who's driving a Honda or Toyota, but would really rather have a Mercedes but can't afford one," Bricklin told Knight Ridder News. "We're not looking at selling the cheapest car in the market. We're looking at selling the cheapest in the top-end segment."
In Bricklin, Chery teamed with a bold American car industry veteran with a history of successfully launching new automobile brands and dealer franchises. The gold star on Bricklyn's résumé is establishing Subaru of America in the late 1960s.
In some circles, however, Bricklin is regarded as a fast talker with big ideas but faulty execution. He's infamous for the bankruptcy of his futuristic SV-1 sports car, the flat sales of Fiat imports and the flop of the cheap but unreliable Yugo.
Despite Bricklin's track record, it can't be denied that his business model has the ability to succeed in the American market, and follows the trend of Asian companies from Japan in the 70s and South Korea in the late 90s. The business model leverages the low cost, hard working Asian labor force, efficiencies in shipping and the U.S.'s pro-competition business climate and enormous market potential for low- and mid-priced cars.
"I'm real skeptical about Bricklin. But the reality is we'll soon be seeing Chinese-made vehicles coming over here. Bricklin's could be the first to reach the U.S. market,'' said auto analyst Jim Gillette of market researcher CSM Worldwide of Northville, Mich.
Adding an extra dose of theatrics to Malcolm Bricklin's Chinese import adventures, his son Jonathon has been following him around filming his business dealings and unorthodox conduct—from the day-to-day operations in Visionary's trendy Tribeca, New York office, to franchise dealership sales calls and trips to China.
The film will showcase the unpredictable personality of the 67-year-old businessman. The film appears to emulate other business reality programs, such as the documentary "Startup.com" filmed in the heyday of the Internet boom and Donald Trump's current successful television show, "The Apprentice."
The Plight of Chinese Auto Workers
Though the adventures of Malcolm Bricklin have been the most pulp news coming out of the Chinese auto industry, there are other industry trends consumers should know.
Ford, Volkswagen and BMW all have plants in China. In some respect, they have little choice in outsourcing there if they want to remain competitive. Because the Communist regime prevents its currency from appreciating, Chinese goods and labor remain artificially cheap.
For example, Chinese assembly line workers earn approximately $2 an hour. In South Korea, the same worker earns $22 and the comparable U.S. wage is approximately $60 an hour. As China becomes wealthier, naturally the value of the labor wages should also increase. However, the Communist regime intentionally prevents the Chinese currency from appreciating; this unnaturally prevents the standard of living of the working class to improve and has resulted in large trade surpluses.
This economic tactic benefits the regime at the expense of the working class. More car manufacturers are thus forced to invest in China to utilize the cheap labor to keep costs down in an ultra-competitive industry.
Realities of China's Auto Industry
To access the Chinese market, foreign businesses must accept the Communist regime's restrictions. Companies often remark that they have no choice but to conduct business in China, despite many unfavorable factors.
Here's one example of the obscure laws for foreign enterprises in China: in an attempt to jumpstart the national auto industry, the Communist regime enacted protectionist measures for international manufacturers interested in establishing production facilities in China.
China only allows foreign automakers to enter China by setting up joint ventures with Chinese state-run counterparts. Chinese companies would then quickly learn the necessary skills of running an auto company. In order to protect their intellectual property and long-term interests, foreign companies often kept their own design and R&D away from their Chinese forced marriage partners.
According to industry expert Michelle Krebs' recent column at Edmunds.com, it was rumored that the Communist regime is even considering legislation to force foreign automakers to supply their previously protected designs and research to their Chinese counterparts as well.
"And then there's China, where international standards for intellectual property rights are not only flagrantly disregarded, but now appear to be sanctioned by the Chinese government. Word out of Beijing is that the government is considering a policy that could force foreign automakers, if they want to expand in China, to hand over auto designs and tooling to their Chinese partners," states Krebs
Similar to the entertainment and fashion industries, piracy of intellectual property is also a problem in the auto industry. Currently, General Motors is in a bitter lawsuit against Malcolm Bricklin's partner, Chery. GM claims Chery's top-selling vehicle, the QQ, is a direct copy of its Chevrolet Spark.
Even Bricklin sidestepped a question in an interview with Paul and Anita Lienhart in 2005 when they probed about the issues involved in working with a company which ultimately answers to the Chinese Communist regime. They asked: "Is it a good thing that the provincial government owns Chery?"
Bricklin responded, "This is the most wonderful thing that ever happened in my life. I'm going to sell a quarter of a million cars. I don't give a damn what everybody else thinks."
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