Tariff slows China's move into U.S. market

Volvo, a unit of China's Geely, opened a plant in South Carolina this year.

The dramatic rise of China's automakers over the years has led to predictions of a rapid entrance into U.S. competition, but it is nearly 2019 and the market has still not seen a Chinese- brand car for sale.

And despite the buzz about deep Chinese pockets paying for new North American auto manufacturing capacity, it finally took a former Ford Motor Co. brand — Volvo of Sweden, as a business unit of China's Geely — to open the first Chinese-backed U.S. auto plant in South Carolina this year.

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Nor are things looking any more certain for Chinese imports as 2018 draws to a close.

Funny how a trade war can change your plans.

After years of methodical preparation, two Chinese automakers — Geely and GAC — appeared ready for the big leap into the U.S. market. Then the Trump administration slapped a 10 percent tariff on Chinese imports, with plans to raise it to 25 percent on Jan. 1. That tax has frozen those two automakers in place.

Until that tariff is lifted, it will be up to an untested bunch of EV startups — such as Faraday Future, Byton and Nio — to find out whether American motorists are willing to buy Chinese brands.

But other activities are underway. The Chinese automakers Beijing Auto, BYD, Changan, Geely, Great Wall, Guangzhou Auto and Shanghai Auto all have established centers for design and commercial development, mostly in California and Michigan.

To be sure, international automakers have successfully imported Chinese-made models such as the Buick Envision crossover and Volvo's long-wheelbase S60to the United States, notes Jeremy Acevedo, an analyst for Edmunds.

In the wake of the tariff, Ford killed plans to import a Chinese-made Focus Active to the United States. The Active, which was supposed to go on sale in the second half of 2019, would have given Ford an entry in the small crossover segment, with prices starting around $20,000.

General Motors' Chinese-made Envision already established a niche in the U.S. last year with sales of 41,000 units. But GM says it will halt imports of the midsized crossover unless it gets an exemption to the tariff.

But Chinese brands are another matter. It is not yet clear whether Americans are ready to trust the hopeful new players, Acevedo said.

"Consumers are focused more on the reputation of the brand than where the vehicle is actually built," Acevedo said. "But a new brand is different. I think it's going to be a tougher pill for shoppers to swallow."

Since U.S. trade policy shifts like the weather, it may be too early to count out the Chinese. With that in mind, here's a company-by-company rundown of automakers that aim to sell vehicles in the United States.

BYD: The Shenzhen-based automaker is betting on growing U.S. demand for its electric buses. BYD builds electric buses in its assembly plant in Lancaster, Calif. BYD has delivered 270 buses in North America, with 380 ordered or in production.

Byton: Next year, the startup's Nanjing plant will produce the M-Byte electric crossover, which boasts Bosch powertrain and brake technology. Despite the tariffs, the company has not yet revised plans to enter the U.S. in 2020.

Faraday Future: U.S. press reports say Faraday is short on cash as it attempts to launch ina converted tire factory in Hanford, Calif. The startup is reportedly mired in a dispute with its financial backer, billionaire Hui Ka Yan, who has invested $800 million. Will Faraday deliver cars to U.S. customers next year? Stay tuned.

GAC: Last March, GAC began recruiting U.S. dealers to sell its seven-seat Trumpchi GS8 crossover, which is a strong seller in China. But last month the company said that because of growing trade tensions its planned 2019 entry may be delayed until 2020.

Geely: For the U.S. market, Geely created a new brand — Lynk & CO — with engineering assistance from partner Volvo. In 2019, Geely will launch the Lynk brand in Europe. However, the company has not disclosed a U.S. launch date.

Karma: Four years ago, Chinese supplier Wanxiang Group bought the assets of bankrupt Fisker Automotive and relaunched it as Karma Automotive. In November, Karma Automotive will roll out a $145,000 luxury model dubbed the Aliso Edition.

Nio: In June, Nio Inc. began delivering its ES8 seven-seat electric SUV in China. Backed by Internet giant Tencent Holdings Ltd., the EV startup has access to deep pockets. Although it has opened a technical center in San Jose, Calif., U.S. plans remain vague. In June, the company said it might launch U.S. sales "in two or three years."

You can reach David Sedgwick at dsedgwick@crain.com

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