Jiangling SUV faces European test


Peter Goodman


July 11, 2005


  
Peter Bijvelds, pictured beside a Landwind in Erp, Netherlands, says there is a lot of car in the mainland SUV for the money that you pay.
PETER GOODMAN, WASHINGTON POST

The dealers call impatiently from France, Italy and Moldova. They have heard that a Chinese-made automobile, the first to land in Europe, is a third cheaper than anything on the market. When will the ship arrive?

With each call, Peter Bijvelds swells with vindication. On a continent defined by BMW, Renault and Mercedes, he has bet that he can interest Europeans in the Landwind, a sports-utility vehicle made in China at a factory the government owns. The first 200 reached Antwerp, Belgium, a week ago. He has already sold the lot, plus 100 more.

''You cannot compare it to a VW or a BMW,'' said Bijvelds, president of LWMC, Landwind's sole European distributor. ''But, for the money, you get a hell of a lot of car.''

The Landwind is among the first in a wave of Chinese-made cars reaching Europe this summer, part of China's quest for overseas markets.

CNOOC's bid to take over Unocal is the clearest sign of this ''go out'' strategy, but the migration of its own companies overseas is largely about bringing goods to new consumers: Mainland factories, long focused on churning out low-priced products, are seeking to become recognizable brands.

China's global reach has already reshaped the home appliances and electronics sectors, with Lenovo buying IBM's PC unit, TCL snapping up France's Thomson and rights to its RCA logo, and Haier pressing to buy Maytag.

Now, the same trend is emerging in the auto industry. Last year, firms exported only 100,000 vehicles, mainly to Southeast Asia, Africa and the Middle East, said Frost & Sullivan China researchers in Beijing. The European foray is the first test of the world's richest markets. Last month, Honda loaded a ship near Guangzhou with cars for Germany and Italy. Brilliance China Automotive Holdings plans to sell sedans in Germany this fall. Chery Automobile plans US sales by 2007.

``I just look at the Chinese and I see how fast they are moving on the international scene,'' said automotive consultant Maryann Keller. ``They're taking the Japanese plan for national development and compressing the time.''

These developments are occurring as US carmakers struggle. An hour of assembly-line labor costs about US$55 (HK$429) an hour in Detroit, US$30 in Germany and less than US$5 in Poland. In China, wages are about US$1.50 an hour.

Some say China's carmakers will overcome doubts that once plagued automakers in Japan and South Korea.

But the move overseas is driven by weakness more than strength. A flood of credit has nurtured too many factories, resulting in gluts. This is particularly pronounced in the auto industry.

China is home to more than 100 firms with a collective capacity for about six million cars a year. Yet sales last year totaled only 2.3 million. An ongoing US$25 billion expansion is expected to exacerbate the glut, nearly doubling existing capacity by 2007. Meanwhile, sales growth has slowed from 76 percent in 2003 - fueled by easy credit terms that have produced many bad loans - to 15 percent last year. Prices have fallen between 5 and 14 percent every year since 2000, according to Frost & Sullivan.

Landwind is made by Jiangling Motors, set up in Nanchang in 1963 to repair trucks and buses. Recently, it has profited from the passenger car boom.

The Landwind was born like many Chinese products: Jiangling purchased all the SUV models it could, took them apart and studied them. In 2001, it built a factory, aided by tax breaks and cheap land from the local government. The next year, it made 200 SUVs: some front-wheel drive and some four-wheel. The following year, Landwind sold 2,800. This year's target is 21,000.

But Landwind has been hurt by the glut, chopping the price of its most popular vehicle to US$20,000 from US$22,500. By late 2003, Jiangling marketing director Liang Bo was looking for export possibilities.

``We have to be stable and show very good performance in Europe, and then we will go to the United States,'' he said. ``We want to be a global brand. It might take a long time, but we're starting now.'' But how? How would it meet European emissions standards?

In came Bijvelds, 27, who runs his own import-export firm, bringing Nissans to Holland from Italy.

In April 2004, he visited the factory in Nanchang, a gritty city in Jiangxi province. He liked what he saw, a tidy factory of 1,000 workers that can make 50,000 vehicles a year. It has Japanese robotics, British assembly equipment and a German paint system.

When he drove the SUV, he was impressed. For Europeans wanting to tow a boat or seeking a roomy vehicle, it could challenge the Korean Hyundai Tucson and Kia Sorrento.

Bijvelds shipped two sample models to Europe and hired engineers to work on making them emissions compliant. Three months and US$1.8 million later, he had the fix: the addition of about US$350 worth of gear.

In March, he became sole distributor in the European Union, plus Switzerland. He has since ordered 600 vehicles.

The retail base price is US$20,400. That includes 64 percent in Dutch taxes. The closest competitors, Hyundai and Kia, sell for at least US$33,000.

``It's a nice-looking car, a lot of space and a really good price,'' said Peter Karel, 58, buying a 2.8-liter diesel model for about US$25,000 - less than half that of a Nissan he had considered.

``When Nissan first came to Europe, people said, `Well, it's a Japanese car and we don't know what that is,' but it has worked out well,'' he said. ``If it's a good ride, then fine.'' WASHINGTON POST

 


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