Bricklin Lays Out Chery Plans

2005 Chicago Auto Show Index by TCC

Perennial automotive entrepreneur Malcolm Bricklin is back, and after months of rumors, he outlined for an unexpectedly aggressive plan to market at least one million Chinese automotive imports in the U.S. — and to sell another one million Chery-branded products that would be produced in the States.

Where initial reports suggested Bricklin would focus on Chery’s QQ minicar, the one-time importer of Yugos and Subarus told TCC he’s looking at a wide range of vehicles, including a sporty competitors for the BMW 3-Series. The move would potentially broaden the new brand’s appeal — and avoiding a potential legal battle with automotive giant, General Motors.

Within seven years, said the long-time industry executive, his new import company hopes to be selling a million Chinese-made cars annually in the U.S. , while the manufacturer has set its sights on becoming “the number-one car company in the world.”

From Fuji to Yugo

Bricklin earned his spurs — and a sizable fortune — 37 years ago, when he began importing cars built by Japan ’s Fuji Heavy Industries. He soon sold off his share in the importer, Subaru, but has stuck his hand in a number of other projects over the years, including the ill-fated Yugo, and a short-lived project to build the Bricklin sports car in the Canadian Maritimes. In a lengthy interview with TCC, Bricklin and his new chief engineer, Dennis Gore, insisted they’ve learned a lot from past successes — and failures.

One critical lesson: their firm, New York-based Visionary Vehicles, will not focus on the absolute bottom of the new car market, like Yugo did. If anything, the first product to reach market may very well be aimed at the 3-Series, Bricklin suggested, but with a price tag of “under $20,000.” In all, the two executives noted they currently have 14 different possible models under preliminary development. If initial plans hold true, Bricklin would like to have a full range of powertrains, including four-, six-, and eight-cylinder engines, and even hybrid-electric drives, for each model in the lineup.

That sort of program would strain the resources of even the biggest automaker, never mind a fledgling Chinese manufacturer with little experience building modern cars. But together, Bricklin and Chery have enlisted assistance from major players in the global auto industry. Italian design houses Pininfarina and Bertone are both involved, as are major suppliers, such as Detroit ’s troubled Tower Automotive.

Chery’s products will be specifically designed for U.S. tastes and needs, Bricklin and Gore asserted. That’s good news not only for buyers, but for the company itself. The origins of the QQ remain cloudy, though it appears the design is a virtual dead-ringer for the Chevrolet Spark that GM also sells in China . The U.S. maker has been trying to shut down production of the little Chery minicar, which outsells the Spark by six-to-one. And it is clearly ready to block the QQ, which Bricklin had considered importing.

Stand-alones and Wal-Mart

Sidestepping that confrontation, Bricklin admits there are still plenty of other challenges to get his Chery lineup ready, so a projected U.S. launch in early 2007 is tenuous, at best. Even so, he’s planning to make fast to get things ready. More than 1200 potential dealers have already contacted Visionary Vehicles, and by March, the firm intends to begin franchising what will shortly grow into a distribution network of about 250 retailers. Many dealers will likely operate numerous showrooms, and Bricklin wants to have satellite service centers set up alongside, or even within, the confines of major retailers, like Wal-Mart. Successful dealer candidates will ultimately need to be looking at investments of around $15 million.

For that money, Bricklin said he expects each dealer to turn around 4000 cars annually, which would make the new franchise one of the most successful in the industry on a per-store basis. It would also add up to a lot of cars. Right out of the box, Bricklin insists he can move 250,000 cars a year, and the goal is to hit 1 million by the seventh year in the U.S. That would give Visionary and Chery a market share north of six percent, but their ambition extends even further.

That might pose problems, considering China ’s fast-mounting trade deficit with the U.S. Bricklin admits that could trigger, “the fear,” his term for a knee-jerk political backlash that might lead to trade restrictions like those once imposed on Japanese auto imports. To soften such concerns, Bricklin claims Chery is laying plans to open a plant in the U.S. , possibly taking over a facility abandoned by the Big Three American manufacturers. Chery, meanwhile, is looking to do an IPO, or public offering of stock, which would end its position as an essentially government-run and funded manufacturer.

Chery pride

Chery is something of an anomaly among Chinese automakers. While there are, by various estimates, more than 200 car companies in the country, only a handful are serious players expected to last long-term. Even though sales have mushroomed — China last year passing Germany to become the world’s third-largest national market — the likely survivors have set up expansive joint ventures with foreign partners. GM, for example, has ties with several different Chinese companies, most notably Shanghai Automotive Industries Corp. Chery has, until now, remained independent.

But according to Bricklin, the Chinese maker sees that as an asset, forming foreign affiliations only when needed. Using those ties, and with the help of regional distributors, like Bricklin, “they want to be the number one car company in the world. And they know to do that, they have to be better than Toyota.”

It’s a tall order, and one prompting plenty of skepticism. “It sounds like a stretch to me,” says GM CEO Rick Wagoner. He says he’d be surprised to see any Chinese company make real inroads into the U.S. market for at least another five years or so. But it’s only a matter of time, Wagoner quickly adds. “Anybody would be silly to underestimate the long-term challenges the Chinese could bring into this market.”

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