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What has emboldened GAC to enter U.S.?
Yang Jian | 2018/1/19

SHANGHAI -- China's state-owned automakers tend to be risk-averse creatures.

As profits pour in from their partnerships with foreign automakers, they hesitate to rock the boat. 

So why is Guangzhou Automobile Group Co. behaving differently? What led the company to disclose plans this week to enter the U.S., widely viewed as the world¡¯s toughest market?

The reasons are twofold. 

The first is its entrepreneurial culture, which has much to do with GAC¡¯s location. The company is headquartered in Guangzhou, the capital of south China¡¯s Guangdong province.  

The port city, 70 miles northwest of Hong Kong, has been a foreign trade outpost since the late 1700s. After Beijing launched economic reforms in the 1970s, Guangdong province attracted huge investments from foreign companies and Chinese expatriates.

GAC, which is controlled by Guangzhou¡¯s municipal government, is immersed in this entrepreneurial stew. Influenced by this culture, GAC is less risk-averse than its state-owned peers.

Here¡¯s proof. A few years ago, GAC acquired two small, private automakers -- Gonow Automobile Co. and ZX Auto Co. -- to expand production. The gamble paid off. Last year, GAC¡¯s vehicle sales soared 37 percent to 508,000.

Those growing sales -- along with the company¡¯s joint ventures with Toyota, Honda and Fiat Chrysler Automobiles -- have given it ample cash flow to finance an overseas expansion.
A fast learner
In the automotive world, GAC¡¯s rise and breakneck expansion are almost without precedent.

Established in 1997 as a producer of motorcycles and small buses, the company did not start producing passenger vehicles until 2010. That¡¯s right: In one of the business world¡¯s most demanding product segments, GAC has exactly seven years¡¯ experience.

Unburdened by a legacy business, GAC is accustomed to moving quickly. In recent years the company has rolled out a wave of crossovers and SUVs under the Trumpchi brand, and consumers snapped them up.

Which brings us overseas. GAC exports vehicles to 14 countries and now it wants to test the waters in the most challenging market of all. 

In characteristic fashion, the company has prepared methodically. It has opened an r&d center in Silicon Valley. It soon will open a second technical center around Detroit. 

It has conducted market research and it has cultivated close relations with two key allies: FCA and the National Automobile Dealers Association. 

FCA and GAC jointly produce and sell Jeeps in China, where Jeep is highly regarded. And NADA has invited GAC to recruit dealers at its annual convention in March.

To be sure, this is a highly risky move for a little-known Chinese brand. For example, it is unclear whether FCA will allow its dealers to sell GAC models.

But the potential reward for GAC is huge. 

The U.S. arguably has the strictest regulatory framework of any market. If GAC can establish itself there, it can crack any other market in the world. 

For a company steeped in Guangzhou¡¯s can-do business climate, that risk is worth taking.

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