Geely's Designs on North America
- March 15, 2006
- The Car Biz
- Posted by George Peterson
- Comments Off on Geely's Designs on North America
Chinese Manufacturer Looking to Supply U.S. Buyers with Basic Transportation
Geely is the second Chinese automaker to announce plans, however basic, to crack the North American auto market. Last year, Malcolm Bricklin of Visionary Vehicles announced aggressive, and seemingly unrealistic, plans for bringing vehicles from Chinese maker Chery to the States by January 2007 and selling 250,000 units in the first year or so. While Visionary Vehicles cannot be written off just yet, the company will not meet its initial launch targets set out at the 2005 Chicago auto show. By Bricklin’s own admission, Chery-made cars won’t begin arriving on American shores until late 2007 at the earliest.
By comparison, Geely is hoping to sell a modest 25,000 units their first year. Ambitious goals and lofty talk aside, when either company arrives and which is first remains to be seen.
According to John Harmer, COO of Geely USA, however, being first is not the objective. “We don’t care who’s first. We care that when we do [arrive], we are perceived as worthy,” he told a group of industry analysts and journalists at a meeting of the Society of Automotive Analysts in March 2006. Harmer shed a bit more light on Geely’s intentions at the meeting, where he was one of a three-member panel discussing China’s automotive future, and VehicleVoice and AutoPacific correspondents were there to hear it firsthand.
Sales Target Launch: Fall 2008
Geely expects to have its first entry to U.S. dealers by fall 2008, which presupposes they will have signed up dealers by then. The launch vehicle will provide the basics and not much more. (Harmer boasted of receiving more than 200 dealer enquiries thus far, and does not seem to be worried about being able to establish dealers.) Newer technology and creature features like Bluetooth and GPS navigation would not be offered and the radio will stick to a single-disc CD unit, but the entry will get power windows/locks and air conditioning. In Geely’s approach, the road to U.S. consumers is by providing basic, affordable transportation that meets U.S. emissions and safety standards, as well as U.S. expectations for quality. Harmer envisions a product that will fill the bill for basic around-town transportation and be trustworthy for long vacation drives, in a vehicle still under its new-car warranty.
The decision to approach the market from the affordable, everyman end of the vehicle spectrum is also consistent with the mission the company touts on its home-market web site: “Make good cars that common people can afford. Let Geely cars go to the whole world.”
The first car from Geely may be an evolution of its home-market CK sedan, which was the example on display at Detroit’s auto show this year. This sedan is small in its current form for U.S. tastes; according to data on the Geely international web site, it is smaller than the new-for-2006MY Kia Rio by about 2.6 inches in wheelbase and 3.5 inches in overall length. Geely’s home-market CK looks to 1.3L, 1.5L, and 1.6L DOHC 16v four-cylinder engines, with the most powerful delivering 108HP.
Price Will Be Only Initial Attraction for Purchase
Geely needs a low price to entice buyers to choose their car over established brands, particularly having chosen the basic transportation route. The low price is the only real advantage an unproven entry will have over existing models. Basic transportation can already be found in many forms (including used cars) for $10,000.
Geely has promised a price below $10,000, but how far below that mark the car comes in will in no small measure determine the brand’s initial success. A $10,000 price tag is not low enough to ensure a successful sales launch. One can get a Toyota Yaris with proven quality and a golden reputation for $11,500. Chevrolet‘s Aveo carries an MSRP of about $9900 and the Kia Rio about $11,100, but neither entry sells for sticker very often. And what if Toyota (or the others in this segment) dropped their base price, preferring to sell at a loss rather than to leave the door open even a crack? If the price difference between a Geely and entries like the Aveo, Yaris, Honda Fit, or Rio is less than $1500 or $2000, it may be too close to convince American consumers to try this upstart out.