China's hopes for U.S. are down to Zotye

LOS ANGELES — Not long ago, it looked like Guangzhou Automobile Group would be the first Chinese automaker to set up shop on U.S. shores.

It had twice made appearances at the Detroit auto show, showing off SUVs under the Cobo Center lights and winning respect for its designs and quality credentials. Between those events, in March 2018, GAC made an attention-grabbing debut at the National Automobile Dealers Association Show to recruit dealers.

At that same show, former Mazda and Volvo executive Duke Hale was working his contacts in the hallways of the Las Vegas Convention Center, quietly lining up dealers for a startup that could serve as a distributor for multiple Chinese brands.

Now, Hale's HAAH Automotive Holdings has signed more than 100 dealers for Zotye Automobile Co., the only Chinese automaker with definitive plans to enter the U.S. market, starting in 2021.

And GAC? After several postponements, it has pulled the plug on its U.S. ambitions, citing U.S.-China trade friction.

So why is Zotye USA moving forward, tariffs or no tariffs?

"We're the real deal," Hale told Automotive News, with characteristic bravado. "The fact that we've already signed over a hundred dealers, that speaks volumes. I don't know if another automaker, at least not in recent memory, has ever signed more than a hundred dealers this early on."

Zotye USA expects to have 250 dealers by the time its first vehicle, the compact, gasoline-powered T600 crossover, goes on sale in 2021 for around $20,000. HAAH has built a team of import veterans — including sales boss Bob Pradzinski, formerly of Hyundai, and marketing chief Jan Thompson, previously with Mazda, Nissan and Toyota — to lead the charge.

And Hale, 70, has been promising for months to name a second Chinese automaker that wants its own distribution deal. The distributor, headquartered in Irvine, Calif., can serve as a platform for additional manufacturers that want to enter the U.S. market without the heavy lifting, said Hale, who is the CEO of HAAH and subsidiary Zotye USA.

Because Zotye Auto started out as an auto component supplier, Hale argues that the automaker has a cost structure that could survive a new round of Trump tariffs. Still, he's hopeful a U.S.-China trade deal will be reached before the T600 arrives in U.S. showrooms. Additional Zotye vehicles are planned for the U.S., including perhaps a full EV.

"We're not looking for tariffs — that's certainly a fair statement — but we could withstand some tariffs and still come into the market, even if that were to occur, because Zotye is a vertically integrated company," he said. "That's one reason perhaps why we're able to move forward and others aren't now."

Hale, who returned from China in mid-October, addressed media reports there that Zotye and some of its peers have run into financial trouble. According to Bloomberg, Zotye has denied considering bankruptcy. The company posted a first-half loss of $38 million on a 50 percent drop in sales to 73,900 vehicles, Automotive News China said in August.

"I was just at Zotye two weeks ago, and I can tell you that business from my vantage point was pretty much business as usual," Hale said. "Anybody that says that Zotye is about to go out of business is grossly exaggerating old news."

Hale acknowledged that most automakers in China face sales and profitability struggles. But Zotye's U.S. plans continue.

"They're definitely committed," he said. "And we're committed. I mean, we're spending a lot of money. And the dealers are committed. We're moving forward. Nobody can say anything in this world is a hundred percent, to be fair. Based upon our best knowledge at this time, all is a go."

Still, given the long history of Chinese automakers pledging to sell in the U.S., nothing is guaranteed. In early 2010, another U.S. distributor, Green Automotive Co., said it expected to begin shipping Zotye cars to the U.S. by the end of that year.