Quantum Leap: Chery and the Emergence of China's Auto Industry

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Peri.jpgPanda.jpg Does the Peri minicar (left), built by China's Great
Wall Motor, look remarkably similar to the Fiat Panda (right)?


A Turin court was in no doubt last month when it barred the Peri from being sold in the E.U., after an appeal by Fiat. Yet unsurprisingly, Great Wall Motor was able to shrug off the Italian court's decision, because a few days later a Chinese court dismissed the claim filed by Fiat in China alleging the GWPeri model was an infringement of its patent.

The Peri/Panda case is by no means the first claim of imitation against Chinese auto makers. In 2006 The Times described at length how the likes of General Motors, Rolls-Royce, BMW, DaimlerChrysler, Honda, Audi, Nissan, Toyota and Mercedes-Benz have all had to fend off a so-called attack of the clones from Chinese manufacturers like Chery, Shuanghuan, Hongqi, Geely and JiangLing. Some analysts have even concluded that Western manufacturers have to accept copying as part of the price of doing business in China, like Honda concluded when it lost half of its motorcycle manufacturing market share in China to cheaper Chinese immitations. Staying in China, Honda decided, required entering into partnership with some of the very companies copying its bikes. 

Yet with the steady growth of the Chinese car market, China is no longer producing just lower-value clones. Chinese brands have grown to the point that 57% of all vehicles sold in China in 2006 were from local manufacturers, and in March 2006 Chery Automobile became the first Chinese auto maker to top the domestic car sales list. To actually break in to markets overseas, however, and to overcome their disadvantages in product and business model innovation and manufacturing quality, Chinese car makers have to make a quantum leap across the automotive value chain, enhance quality standards while developing unique models. While positioning itself for exports, Chery has been co-operating with global design and engineering experts and is now boosting exports to markets such as Egypt, Italy and Russia.

For many years regarded as low-end, unreliable brands, Chinese auto manufacturing is experiencing a gradual coming of age with the global emergence of Chery, and with the growth of the market in China and government encouragement of R&D, China will gradually lose its knack for manufacturing cheap clones.

Additional sources:
China. An Automotive Industry on the Verge (Accenture)
Shaping the Future of China's Auto Industry (McKinsey)
Foreign Technology in China's Automobile Industry (China Environment Series)

Images:
http://blogs.automobilemag.com (Panda)
http://www.cnnauto.com (Peri)


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1 Comments

Barry said:

In addition to Chery's rising star, China Car Times on Monday pubished a very interesting interview with Geely CEO Li Shu Fu, who stated he wants Geely to make 'the best car in the world.'

For the full interview, see

http://www.chinacartimes.com/2008/08/04/li-shu-fu-making-the-best-car-in-the-world/

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