Ford's China partner planning to sell in U.S. in 2020
Ford Motor Co.'s newest Chinese partner, Zotye Automobile, is preparing to launch at least two SUVs in the Blue Oval's backyard.
The relatively small Chinese automaker Zotye Automobile International Co. is partnering with California-based HAAH Automotive Holdings to look beyond its home market and form a new sales distribution company in the United States known as Zotye USA (pronounced ZOH-tay) — a tie-up that would sell direct competitors to some of Ford's most lucrative SUVs.
"We're facing a new reality where the Chinese domestic market is slowing for the first time in recent memory," said Michael Dunne, CEO of Hong Kong-based ZoZo Go, a firm that advises automakers on the Chinese market. "Now that things have gone soft, automakers are finding themselves in a situation where they have to export and find new markets. Zotye is possibly the first, but they won’t be the last."
Chinese automakers have long been eyeing the rich U.S. market, following years of accusations that state-required joint ventures with foreign automakers are being used to more quickly gather global industry technical intelligence and manufacturing know-how. But there's a new sense of urgency as a nearly three-decade period of growth has been followed by months of contraction, added Dunne.
A Ford spokesman said Zotye's plans to enter the U.S. market are unrelated to its joint venture with the automaker on electric vehicles in China for that market, and declined to comment further.
Dealer recruitment efforts by Zotye and Guangzhou Automobile Group Motor Co. Ltd. (GAC) herald the prospective arrival of long-anticipated Chinese players in the competitive U.S. market, even as trade tensions escalate between China and the United States. Zotye USA says it is prepared to meet the challenge, though it's optimistic the frayed trade relationship between the two countries will improve by the end of 2020.
Ford recently scrapped a plan to import a Focus crossover from China, citing the potential impact of tariffs imposed on Chinese imports by President Donald Trump as too large a threat to profits on what Ford said would have already been a low-margin vehicle.
"It won't stop our deal," HAAH CEO Duke Hale said of trade uncertainty. "Both Zotye and HAAH are in a position to be able to give up a little margin and still be more than competitive."
Hale said Zotye is developing two yet-to-be-named compact and midsize SUVs specifically for the U.S. market — two of the most competitive segments — though it's not clear yet which vehicle would arrive first. The vehicles would be built in China and imported to the U.S. Among the target competitors would be the Toyota RAV4, Honda CR-V and Nissan Rogue — all of which compete with the Ford Escape.
The new company, wholly owned by HAAH, will be based in Lake Forest, Calif. Plans for the dealer network include up to 325 stores nationwide, targeting the top 80 markets in the U.S. — including Metro Detroit.
Others Chinese players have tried and failed to enter the U.S. in the last 15 years, including Chery Automobile Co. and industry giant Geely Automobile Holdings Ltd., which also owns Sweden's Volvo Cars Ltd. and holds a nearly 10 percent stake in Germany's Daimler AG.
Hale said his holding company has been in talks with Zotye for "a couple of years," evaluating the Chinese automaker's product for the U.S. market as the small company grows in its home market.
"This company is in growth mode," he said, "and it's possible they could get a first-mover advantage."
Zotye could see some competition from GAC Motor, which came to the Detroit auto show at the beginning of this year with plans to enter the U.S. market by the end of 2019. A spokeswoman for GAC Motor said the automaker is on track to begin selling its GS8 SUV in the U.S. by the beginning of 2020, and is actively recruiting dealers.
The tie-up with HAAH is separate from Zotye's joint venture with Ford on electric vehicles for the Chinese market, as Zotye is not currently planning to bring EVs to the U.S.
Ford's China unit continues to struggle, with sales in the Asian market falling by 45 percent in October as an industry-wide sales slowdown sets in. Analysts say that signals the Blue Oval might have missed the wave in the fastest-growing global market.
And as the Dearborn-based automaker looks to stop the bleeding in China, a global tie-up with one of its Chinese joint ventures likely isn't the focus, Dunne said.
"Inside China, Ford, like many other automakers, was looking for a solution to meeting China's EV requirements," he said. "I don't think they were ever looking for a joint venture for the purpose of being global partners."
Meantime, privately owned Zotye is coming to the U.S. with one of the market's hottest products and Ford's livelihood: SUVs. Within less than two years, the Blue Oval says SUVs, pickups and commercial vehicles will account for nearly 90 percent of its sales volume in the SUV-crazy U.S. market.
The move from Zotye, which sells some 300,000 units in China annually, is likely to get the attention of giants like Geely, which sold 1.2 million vehicles last year.
"There is a certain pride in who will be the first Chinese brand to land cars in the American market," Dunne said. "If little Zotye is prepared to enter the market, why not the big guys? There probably won't be a knee-jerk reaction, but others will certainly be watching."