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Inside Out: China Enters the American Auto Market

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Lifan X50

Last week, I was driving the family to SFO after a long, tiring weekend in Napa. Our rental Sienna, its inexplicable fuel guzzling Sport Mode deactivated, floated by vineyard after vineyard.

Mercifully, the din of two healthy toddlers gave way to the tranquility of sleep and I enjoyed my first moments of quiet reflection in four days.

Of course, my thoughts drifted to cars, but not the one I was about to overtake on State Route 37. As we passed the entrance to the Sonoma Raceway, I approached the UDO (Unidentified Driving Object) and could not immediately make out what it was.

As a San Diego resident and a committed car spotter, I am accustomed to seeing out-of-market vehicles visiting from Mexico. But this one was a first on an American road for me. I gently slowed and my wife awoke, just long enough to snap a photo. It was an unassuming red blob; the Lifan X50 you see pictured here. That little, wagony-hatchy thing pulled me out of my Sears Point track-day dreams . . .

Where are the Chinese cars I wondered?

Lifan 630

We import nearly every imaginable consumer product from China, including the iPhone used to take the X50 photo. In fact, China produces more cars than the next two largest producers, Japan and the United States, combined.

I have spent hours in the back seats of Chinese made Audis and Buicks, their quality indiscernible from their cousins here. And although car sales in China rebounded in September, the mid-year sales slump underlines the likelihood that after decades of robust, predictable growth, a new normal of market maturity may be around the corner.

sushi donuts

We should thus expect to see Chinese manufacturers consolidate and begin pushing into new markets, be it the luxury market in China, EVs, new markets abroad, or all of the above. Certainly there are Chinese manufacturers with the resources, export experience, commitment to growth, and long-term vision to bring their cars to North America.

So why aren’t they here?

Chinese auto manufacturers have been sprinting to catch up with their Western and East Asian counterparts. But the answer is less about why there are not Chinese built cars on American roads today, and more about how they are going to get here.

There are essentially three strategies available to Chinese manufacturers who want to enter the North American passenger car market. First, they can follow the well established path of Korean and Japanese car makers before them. That is, import reliable, well contented entry level cars at highly competitive prices. Combine a strong value proposition, with a decade or more of patience, and a plan to establish production in the United States. Second, they can acquire a brand that is already for sale in North America. Third, they can chart a new path, starting from the inside out.

Reality rarely fits into neat categories and there may be as many variations on these strategies as there are Chinese car manufacturers.

Lifan X50 Interior

In fact, the first Chinese made car sold in America is already here, but it’s not a Gonow, Great Wall, or Guangzhou. It is a Volvo S60 Inscription, built in Chengdu, Sichuan and available to test drive at your friendly Volvo dealer. The Inscription is a common S60, stretched to provide an additional 3.4 inches of rear legroom – a common modification for the Chinese market.

The stretched S60 is every bit as elegant and visually subtle as the long wheelbase versions of the BMW 7-Series and Audi A8. It provides Volvo with yet another niche product to pry customers out of other luxury nameplates.

Volvo plans to export 1,500 units to the United States in 2015 and about 5,000 annually thereafter. This niche Volvo, combined with the Chinese built Honda Fit briefly sold in Canada, may be the tip of the iceberg.

dirty car art

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