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Chinese automaker buckles up for a ride into U.S. markets

SHANGHAI, China—Are Americans ready to buy cut-rate Chinese cars?

A little-known Chinese automaker bets the answer is yes, and is gearing up to manufacture and ship huge numbers of low-cost sedans and SUVs to the United States within two years.

It's an audacious plan, and the firm that's trying to pull it off, Chery Automobile Co., is no stranger to risky endeavors.

Competitors have accused the 8-year-old company of stealing automotive designs and producing knockoffs. But Chery—whose name, "qi rui," means "unusually lucky" in Chinese—has seen sales soar, and is partnering with a U.S. entrepreneur to introduce 250,000 of the vehicles in the United States in 2007, and a million units a year within another five years.

The entrepreneur, Malcolm Bricklin, who brought the Yugo and Subaru to U.S. shores, said the partnership would introduce feature-packed vehicles that look like high-end European or Japanese luxury coupes, SUVs and convertibles, but cost 30 percent to 40 percent less. Four of the five models he plans to introduce are below $20,000.

China is able to produce cars at such prices because its labor costs are far below those of the rest of the automaking world. Its autoworkers make barely $2 a day, even as auto plants adopt modern technology.

While some Chery designs will "go after the soul of the BMW," the vehicles won't be imitations, said Bricklin, whose New York-based company, Visionary Vehicles, is allied with Chery.

"Before I got there, they were copying everything known to man," Bricklin said of Chery. "But everybody segues from copying to learning to innovation."

Bricklin said Chery contracted with Italian design houses Pininfarina SpA and Bertone to come up with new-looking vehicles, and had moved from imitation to originality.

Chery, based in the Anhui province city of Wuhu, up the Yangtze River from Shanghai, produced its first automobile barely five years ago. Its tiny QQ model, which retails for $3,600, is now China's hottest-selling car. This year, Chery says it is on target to produce 160,000 vehicles in China, and it is quickly expanding capacity.

Unlike other Chinese automakers, which try to satisfy only domestic demand, Chery's president, Yin Tongyao, has his eye on cracking the U.S. market and is looking to load export models with features, much as Korean automakers have done.

"He believes that if the Japanese and Koreans can do it, why not the Chinese?" said Lin Huaibin, a Chery marketing manager.

Only one of the five models Chery wants to sell in the United States—a hardtop sports car—has been introduced to the public. Designs of the other models—two sedans, a crossover car-utility vehicle and an SUV—are secret.

While Chery strives to improve quality, Bricklin busies himself trying to set up a U.S. dealership network. He said he might alter the brand name slightly to Cherry.

"He's generated a lot of hype in the industry. We'll see how it plays out. Most people are a little skeptical," said Denton J. Dance, senior director at J.D. Power and Associates, a global marketing firm.

Bricklin began importing Subaru autos from Japan in the late 1960s. He started his own short-lived sports car company in the 1970s, and in 1986 brought the subcompact Yugo to U.S. markets, a car so poorly received it became a punch line for jokes.

Bricklin said it would be only a short time before Chinese-made cars reached global quality standards. "And we're not talking about being in the middle or the bottom end of the quality pack," he said.

Volkswagen and General Motors have accused Chery of piracy. Last December, GM Daewoo sued Chery for $10 million, charging that its QQ model was a copy of the Chevrolet Spark, which it strongly resembles. Chery denies the allegation.

"It's inevitable for a growing auto company to have clashes with its competition," said Huang Hui, an official in the Wuhu city government, which has a majority stake in the company.

Huang declined to let a reporter tour the Chery plant.

Executives from U.S. automakers are largely dismissive of Chery's ambitious goals, noting that entering the American market may take far longer than Chery plans.

"Hyundai probably took 12 to 15 years to develop in the U.S.," said Ron Tyack, the president of Changan Ford, a joint venture in China. "I personally don't think it will have much of an impact on the U.S. market."

Dance, the J.D. Power executive, said American consumers would be wary initially of Chinese-made cars from an unfamiliar company.

"They want their neighbor to buy it first and tell them how the quality is," Dance said.

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(c) 2005, Knight Ridder/Tribune Information Services.

PHOTOS (from KRT Photo Service, 202-383-6099): CHINA-CARS

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