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Chinese Automakers Face Road Blocks To U.S. Sales

Automakers looking to make the jump to the U.S. market face a global financial crisis that has slowed growth and sapped the potential for partnerships to ease their expansion.

DETROIT (AP) -- Chinese automakers looking to make the jump to the key U.S. market are facing increasingly strong headwinds, including a global financial crisis that has slowed growth where they already sell cars and sapped the potential for partnerships that would ease their expansion.

But BYD Auto Co. and Brilliance Auto are making China's most prominent appearance yet at this year's North American International Auto Show -- sandwiched between General Motors Corp. and Ford Motor Co.'s displays, instead of tucked away in the basement or outside the main exhibits. And they remain interested in eventually selling in the U.S., although that looks to be years away.

"We will start to develop sales and distribution networks in North America," Wang Chua-Fu, chairman and president of BYD, said at a news conference Monday, the second day of media previews at the Detroit show. He said plans call for U.S. manufacturing facilities "when it is appropriate."

Henry Z. Li, general manager of BYD's auto export trade division, said the company has set a target of 2011 to sell two models that it's showing in Detroit -- the e6, which is an all-electric crossover with a 250-mile range, and the F6DM, a plug-in hybrid sedan. By then, he said, BYD hopes to sell the Chinese-built vehicles in a market that's recovered from its current slide.

"I think the most important thing for us is to bring the right product and that product can prove itself," Li told The Associated Press on Sunday. "It's the product that builds the brand. It's not the brand that builds the product."

U.S. auto sales tumbled to 13.2 million in 2008, down 18 percent from 16.1 million in 2007. Some analysts predict this year's sales will hit 10.5 million, making the prospect of bringing new lines of Chinese vehicles into that market much more daunting.

"The U.S. for a long time was sort of seen as the combination of the Holy Grail and the cash cow," said Rebecca Lindland, an auto industry analyst with the consulting firm IHS Global Insight. "You could come here and, as the world's largest single market, you could make a lot of money here.

"All that being said, right now the U.S. is leading the charge in terms of this global recession. Suddenly, we are not a cash cow and it is a very expensive market to participate in."

Jesse Toprak, executive director of industry analysis for the automotive Web site, said he sees potential for Chinese automakers to sell in the U.S. -- especially those looking to market relatively inexpensive, smaller vehicles. But the Chinese will face a skeptical buying public.

"In this time of economic uncertainty, consumers tend to make safer choices. They don't know about the quality of the Chinese vehicles," Toprak said. "Initially, I think it's going to be an uphill battle for them."

Chinese companies are relatively new to the Detroit auto show, but their presence is growing more regular. In 2006, a lone Geely Automobile Co. sedan sitting outside the main exhibit halls marked the first time a Chinese automaker displayed in Detroit. This year, with the basement hall taken up by a driving track and several automakers skipping the show, China got a more visible spot.

Predictions had called for cars made by Chery Automobile Co., China's biggest domestic automaker, to make the jump to the U.S. as soon as 2010 under Chrysler's Dodge brand. But Chrysler LLC and Chery announced last month that they had called off talks on cooperation due to the global financial crisis.

At last year's Detroit show, China's Changfeng Motor stuck by its 2009 target for exporting to the U.S., and China America Cooperative Automotive Inc., an importer, showed a pickup and SUV made by a Chinese company and offered similar sales hopes. But details on those plans haven't materialized.

"We have to see some recovery in this market before you can build a business case for starting a business in this market," Lindland said.

Battery maker turned car company BYD seems to be following through on its efforts to break into the U.S. market. Last year, it surprised the show with its F6DM hybrid sedan, and in December it launched its F3DM, China's first homegrown hybrid vehicle for the retail market, which is also on display in Detroit.

Shenzhen-based BYD's foray into electric car manufacturing drew broader attention last year when MidAmerican Energy Holdings Co., which is majority owned by billionaire investor Warren Buffett's Berkshire Hathaway Inc., bought a 9.9 percent stake in the company. Li said the investment gives BYD an edge.

"It will bring a lot of confidence from the consumer and also from investors," Li said.

The F3DM -- selling for about $22,000 in China -- can run up to 62 miles on battery power, and then it shifts to a backup gasoline engine. The company says the battery can fully charge in nine hours from a regular electrical outlet, or much faster at BYD's own charging stations.

BYD is looking at a slightly higher-end vehicle for its initial entry into the U.S. market. Li said the e6, for example, would sell in the U.S. for between $30,000 and $40,000 if plans stay on track.

Shenyang-based Brilliance Auto is the other Chinese automaker at this year's show and has four vehicles, including a luxury sedan, on display. Brilliance sells its Zhonghua brand of vehicles and builds, among other lines, the 3 Series and 5 Series for Germany's BMW AG to sell in China.

Brilliance Auto doesn't have a time frame to sell in the U.S. but is at the show to gauge interest in its vehicles. He Guohua, Brilliance Auto Group vice president, told reporters as he showed off the company's vehicles that the Detroit show is a good place to "measure ourselves against international standards."

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