News reports in recent months have featured the upcoming “invasion” of Chinese cars into the North American market. What has caught the attention of many car enthusiasts is the very low prices at which each model will be sold. Prices as low as $ 6,600 have been quoted for a model with a handful of other models also expected to retail for less than $ 10,000. If Chinese cars arrive as expected, look for a massive change in the way entry-level model cars are built and sold in the US and Canada. Consumers can gain from increased competition, although it is not yet known exactly what they will get for the price.
The Chevrolet Aveo, a compact car built by GM’s Korean unit Daewoo, is currently the lowest-priced car sold in the US, priced as low as $ 9,300 after all discounts have been applied. [MSRP is currently set at $9890 for the “Special Value” models]. A 16-valve 1.6L I4 mated to a 5-speed transmission is standard, and Chevy activates an AM / FM radio just in case. Beyond that, the car is really stripped.
On the other hand, two Chinese automakers are preparing to enter the US market, probably in the summer of 2007. By selling 2008 cars, both Geely Automobile Company and Chery Automobile Company are working with US representatives to build dealer networks. at the national level. Chery, who will have to change her name after losing to General Motors in a court decision on her name [too close to Chevy], has a model currently called “QQ” based on the Daewoo Spark that they would like to bring to the US. Geely has similarly priced cars that they plan to market as well.
So what does this mean for the market? Much. In addition to the Aveo, many other small cars are marketed in the US, including Toyota’s Scion brand, the Honda Fit, Nissan Versa, Saturn ION, and offerings from Kia and Hyundai. Some of these vehicles come better equipped than the base Aveo, but for the most part, entry-level models equipped comparably with air conditioning each sell for around $ 12,000.
Even after air conditioning and certain security measures. [like air bags and better fenders] Added to entry-level Chinese vehicles, comparably equipped Geely and Chery models are expected to continue to retail between $ 8-8500. This translates into a price drop of up to 30% compared to competing models.
Naturally, the quality of Chinese cars can be a big concern. China, like Japan of more than 40 years ago, does not stand out for building much of anything that is of excellent quality, it must raise quality standards. Still, even for $ 1,000 more per vehicle, an extended warranty similar to the 100,000-mile warranty offered by Hyundai and Kia could allay consumer concerns. Just add the cost of the warranty to the price and a fully guaranteed $ 9000 Geely could be very attractive.
So how will competing manufacturers react? Lowering their prices accordingly. Look for specially equipped Scions, Kias and Hyundais that will appear in US showrooms priced under $ 10,000. Soon, look out for the Mexican-made Scion fighter jets from Ford and Dodge as well to be featured and sold at incredibly low prices. For 2010, the base price of many entry-level models in the US will be below $ 10,000; if they are not priced accordingly, they may not be sold.
In the long term, the overall prices of all vehicles may start to fall, especially as Chinese manufacturers start to market larger and better equipped vehicles than the entry-level models. A vehicle in the $ 20,000 range was mentioned above. This particular Chery model looks a lot like the Chrysler Pacifica and could be imported to compete against it and other crossover vehicles.
Naturally, the effect on the American manufacturing industry could be devastating and not just for GM, Ford and DaimlerChrysler. Toyota, Honda, Nissan, and Hyundai make cars here. Will they compete on price or will consumers see the big differences in quality and stick with trusted brands?
A revolution is coming in the auto industry, one that is sure to completely redefine the market.