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China Looks to Enter U.S. Automotive Market

January 29, 2018 0 Comments

Guangzhou Automobile Group (GAC) this week announced its plans to sell vehicles in the U.S. market by the fourth quarter of 2019.

Moving business to the U.S. is a tough endeavor; there are significant legal and logistical hurdles GAC needs to overcome. For example: Who will sell the vehicles? Franchise dealership laws across the U.S. prevent automotive manufacturers from selling vehicles directly to consumers, which means GAC needs a third party to sell its vehicles to consumers in the U.S.

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Company President Yu Jun also announced plans to attend the National Automobile Dealers Association Convention in March in Las Vegas to explore GAC’s options in its quest to sell vehicles in the U.S. The Chinese company could build up its own dealer network or partner up with brands with established dealership networks in the U.S., such as Fiat Chrysler.

Even if these hurdles are overcome, will GAC be successful? “Made in China” no longer turns consumers away as it once had; the Buick Envision, a compact SUV, is manufactured in China and sold over 40,000 units in 2017. According to a Mintel report on perceptions of auto brands, 47 percent of Americans said they would consider buying a vehicle not made in America.

GAC is hitting the ground running with a seven-seat SUV as the first vehicle set for a U.S. launch. The timing may be a little suspect, as 2017 marked the first down year for new vehicle sales since 2009, but most of the decline could be attributed to lower passenger car sales.

Luckily for GAC, Americans are continuing to favor larger vehicles like SUVs and crossovers. While passenger car sales might still suffer in the U.S., GAC is coming into a thriving SUV space. Still, its success is not guaranteed; the SUV market is highly competitive, with plenty of models from established brands.

GAC needs to deliver if it wants to achieve long-term, sustained success, including building a high quality product that is reliable and performs well. According to Mintel research, 62 percent of new car shoppers find reliability in a vehicle appealing. If the initial launch goes poorly, it could sink consumer perceptions of GAC and ruin the brand’s viability before it gets a chance to make it.

About the Author:

The DrivingSales News team is dedicated to breaking the relevant and the tough stories affecting car dealers. Have questions for DrivingSales News? Reach the team at news@drivingsales.com.