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How Chinese automakers will enter the U.S. -- step by step
Michael Dunne | 2017/7/11

Perhaps I¡¯m like the boy who cried wolf. If I were to tell you that Chinese automakers are coming to the U.S. for real this time, would you believe me?

For years, companies such as Chery, Geely and GAC have declared imminent plans to launch their products here. And for the past decade, they have failed to do so.  
 
The Chinese at the door again? Really? Cue one big collective Yankee yawn. But this time is different. Today, the Chinese are talking less, but doing more. Much more. 
 
In 2016, China became America¡¯s largest foreign investor. Private investors and state enterprises poured $48 billion into the U.S. economy, according to data from the Rhodium Group. 
 
Chinese investors focused on real estate and the tech sector, including automotive technology. These investments are part of a larger movement of Chinese capital and companies, a Beijing-backed offensive called China Outbound. 
 
That global push has three channels: tech investments, acquisitions and exports. Action is concentrated in California and the Midwest. Silicon Valley is thick with Chinese money.
 
Last month I met Benjamin Qiu, a Chinese mergers and acquisitions lawyer from Loeb & Loeb. We were at Madera, the storied eatery on Sand Hill Road that is ¡°ground zero¡± for Silicon Valley dealmakers. 
 
I asked Qiu how long he¡¯d been based in Palo Alto. ¡°No, I work in Shanghai,¡± he replied. ¡°In June, I move here with family for several weeks. If you¡¯re anybody in Chinese tech, you tend to spend part of your summer here.  Kids for summer camps, entrepreneurs for new deals, and ideas.¡±
 
Altogether, more than two dozen Chinese companies are ensconced in the Valley to fund or develop electric and autonomous drive technologies. And they¡¯re moving fast. 

Here are a couple of fresh examples: 


  • Shanghai Auto -- General Motors¡¯ Chinese partner -- received approval last week to test its own autonomous cars on California roads. Shanghai Auto has plenty of money to develop self-driving vehicles. The company generated a $4.6 billion profit last year while selling more cars than Ford.  
  •  
  • Baidu, the Google of China, announced plans last week to make its self-driving software available to other companies. At a launch event in Beijing, the company named more than 50 partners, including Chery, FAW, Beijing Auto, Ford, Microsoft and Nvidia. Baidu employs more than 150 engineers in the San Francisco area to work on artificial intelligence and mapping. 


Other key Chinese-funded players with boots on the ground in California:  Alibaba, Tencent, Geely, SF Motors, BYD, Beijing Auto, Nio, Lucid and Faraday Future. 

 
If California is high-tech heaven for the Chinese, the Midwest is the key arena for acquisitions.
 
Last month, Chinese-owned Key Safety Systems won approval to purchase Takata, the troubled airbag maker, for $1.6 billion (10.8 billion yuan). Key Safety itself was purchased by China¡¯s Joyson Electronics last year for $920 million.  
 
Meanwhile, China-backed SF Motors agreed in June to acquire an Indiana assembly plant from AM General, the Indiana-based manufacturer that once built utility vehicles for the army. Big-name suppliers such as Henniges and Nexteer also fly the Chinese national flag. 
 
Chinese investors have an appetite for European assets, too. Two of Europe¡¯s most respected brands -- Italy¡¯s Pirelli and Germany¡¯s Kuka Robotics -- now are in Chinese hands. China¡¯s Geely owns Volvo. Shanghai Auto acquired the MG brand. 
 
Impressive enough. But when are we going to see made-in-China cars and light trucks on American roads?  Well, they are already here. Last year, General Motors starting shipping the Buick Envision and Cadillac CT6 hybrid from China.   
 
And starting in 2019, Ford will import made-in-China Focus sedans to the United States. 
 
Imagine it: American cars made in China for sale in the United States. 

Keep in mind that GM and Ford¡¯s Chinese partners own 50 percent of the manufacturing joint ventures. So Shanghai Auto and Changan Auto collect half the revenues for every car shipped to American shores. 
 
China is just beginning to exploit the power of its home market -- the world¡¯s largest.

Why build a second assembly plant in the United States if you can maximize efficiency by making products in one location -- the Middle Kingdom -- and shipping them to the Port of Los Angeles?

China is successfully penetrating the U.S auto market before a single Chinese-brand car has been sold here. Global automakers should not be complacent.


Michael Dunne is president of Dunne Automotive, a Hong Kong-based company that facilitates investments between the U.S. and China. He is also author of American Wheels, Chinese Roads.


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