7.23.2010

GM Faces Competition from Chinese Carmakers

U.S. Automaker Sold More Cars in China than U.S., but New Breed of Low-Cost Hybrid and Electric Cars Gaining Ground

By Celia Hatton


(CBS) With names like Geely, Chery and BYD, you might not know they're some of China's top automotive companies - but Detroit certainly does.

"These are companies that no one had heard of ten years ago that today are getting a lot of international attention," said Bill Russo, the president of Synergistics Limited.

The Chinese market is a bright spot on the balance sheets of U.S. automakers where buying American is both a good investment and a status symbol, reports CBS News correspondent Celia Hatton. For the first time ever, GM has sold more cars in China than in the United States during the first half of this year. More than 1.2 million cars rolled off GM lots in China, versus less than 1.1 million in the United States.

But future demand in untapped markets has foreign and Chinese entrepreneurs seeing dollar signs: 64 million vehicles crowded China's streets last year, but over 200 million cars will jam onto those roads by 2020.

So, to meet that demand, domestic companies are embracing the Communist government's push for leaner, greener vehicles. They're fast-tracking research and development in low-cost electric and hybrid motors in hopes of erasing their past reputation for simply copying American models.

Take Geely - one of the biggest carmakers here. It snapped up Volvo from Ford for an estimated $1.8 billion, while also unveiling 39 of its own car models at the Beijing auto show - including the world's cheapest car - the I-G, with rooftop solar panels and a $2,300 price tag.

As these companies grow, their appetites are going global. Geely's rival, Chery, already exports cars to South Asia, Africa and Eastern Europe. And someday - the United States explains CEO Yin Tongyao.

"The American consumer knows cars very well. We need to be well prepared," Tongyao said through a translator. "I dare not send our cars to the U.S. market before we are really ready."

Other Chinese automakers think they are ready. A dozen years ago, BYD, or Build Your Dreams, manufactured phone batteries. This year, it beat Toyota and GM to sell the world's first mass-produced electric car.

About 50 electric taxicabs are roaming the streets of southern China but soon - perhaps later this year - this same car will be available in the United States, brought to the United States by China's ambitions and America's dollars.

The U.S. billionaire Warren Buffet raised eyebrows when he invested $230 million in newcomer BYD. It's starting to look like a smart move.

And if Chinese car companies succeed in making their cars as good as their dreams, the world's next generation of speed demons might grow up thinking the only cool cars to buy are those made in China.