They're coming to America -- someday
U.S. market still tempts the world's automakers and wannabes
by Lindsay Chappell
Source: Automotive News
The U.S. auto establishment has scarcely heard of Bob Smith and his Alkane Dominator, a beefy military truck he plans to assemble in South Carolina using a Brazilian army vehicle platform and U.S. components.
But like the purveyors of other, better-known brands around the world, Smith wants to break into the U.S. auto industry, set up a dealer network and retail vehicles in a landscape that eats newcomers alive.
Dazzled by the 16-million-plus sales volume of new cars and trucks that U.S. retailers are turning out these days with an average transaction price of $30,665, according to J.D. Power, several established overseas automakers are thinking along the same lines as Smith.
Peugeot, the popular French brand that abandoned the U.S. market in 1991, is strategizing a full-scale return -- maybe even with its sibling brand, Citroen. Carlos Tavares, CEO of parent company PSA Group, told reporters at the Paris auto show last month that PSA will return to North America first with mobility services, such as car sharing. In time, the automaker will return with an as-yet-undefined retail approach.
"We will take a step-by-step approach by first offering mobility services to learn about consumers' expectations so that one day, we will produce our own cars for fleets there," Tavares said of North America. "The last step will be to sell our own brands there using a distribution model we will adopt at a certain time, because by then, many things will have changed."
Executives at Europe's Skoda tell Automotive News that they could make a decision about entering the U.S. market in 2017. The 121-year-old Czech manufacturer, long a subsidiary of Volkswagen, has been outgrowing its old role as VW's European entry brand and now is selling cars in 102 countries.
Ssangyong Motor Co., the South Korean maker of crossovers and off-road vehicles, will enter the U.S. in 2020, CEO Choi Johng-sik says. He says Ssangyong will come up with new models.
"America is very, very competitive, so we need to build a good brand," he said. "That's why we're now preparing completely new products."
Last week, Reuters reported that China's Geely Automobile is pre-paring to launch a middle-market vehicle brand called Lynk & Co., with a plan to introduce it in the United States. Geely did not confirm the report.
Invading the U.S. auto market takes equal parts chutzpah and sangfroid. There are 42 brands here hawking 283 nameplates in different models and configurations. Some brands have dropped out, while competitive realities have kept other wannabes from ever making a beachhead.
The list of failed and stalled entrants here includes Italy's Fiat and Alfa Romeo -- both of which are currently attempting second assaults after retreating in 1983 and 1995, respectively. It includes Japanese carmakers Daihatsu and Isuzu, South Korea's Daewoo, and China's Chery Automobile.
And it includes Ssangyong's new parent company, Mahindra & Mahindra of India. Mahindra tried and failed to enter the United States through an independent distributor, Global Vehicles U.S.A. That effort collapsed in 2010 before delivering a single sale and is still dragging through litigation involving Mahindra and some of the 350 retailers who signed on to sell Mahindra pickups.
Many of Mahindra's would-be U.S. dealers were grandfathered in to the Indian pickup franchise after being part of an earlier plan by the same distributor to import a Romania-built SUV called the Aro. That U.S. import plan also failed.
Other tried-and-eventually-failed U.S. import entrants include Bertone, Colt, Lancia, Maybach, Opel, Renault, Saab, Sterling, Triumph, Yugo and, lest anyone forget, DeLorean.
"People around the world look at the sales volumes going on here, and they look at the fortunes being made here, and they look at what the outlook is in other parts of the world -- and they want to be here," said Charlie Hughes, owner of the brand-consulting firm Brand Rules. Hughes played a key role in introducing the British premium SUV brand Land Rover to the United States in 1987 and was CEO of Mazda North American Operations.
"But the plain truth is that unless you're coming in with something truly unique, it is just not plausible that you're going to get anywhere in this market."
Hughes points out a rare example of success at that: California's Tesla Motors. Tesla offered a product that no one else had -- an electric luxury vehicle -- and distributed it factory-direct, a method that appealed to some buyers, Hughes said.
"If all you're going to do is enter this market offering the same thing everyone else is already offering, you might as well save your money," he said. "The U.S. auto industry is a very expensive place to do business."
How expensive is it?
No. 9 brand Subaru last year spent an estimated $390 million on U.S. advertising to sell 582,675 new vehicles, according to Advertising Age. But to make that possible, Subaru's parent, Fuji Heavy Industries, has invested $1.8 billion in an Indiana auto plant.
Bob Smith, CEO of the South Carolina truck venture, is confident. He believes his Dominator will refill a niche left vacant when General Motors discontinued Hummer. His Alkane Truck Co., a $6 million investment in Myrtle Beach., S.C., will import the chassis of a military vehicle built by the Brazilian manufacturer Agrale and mate it with U.S.-made truck engines, transmissions, axles and interiors.
"Anybody who would've driven an H1 Hummer will be a candidate for this vehicle," Smith said, referring to the military-grade SUV that was an emblem of macho ruggedness a decade ago. Hummer is another brand that came and went in the United States -- killed off as part of GM's 2009 reorganization, along with Saturn and Pontiac.
"There is still a market for this type of vehicle," Smith said. "GM didn't give up on Hummer -- it was political. They were forced to end Hummer when the federal government stepped in and took control of the company."
The Dominator is the same height and width as the discontinued H1 but about 2 feet longer and notably heavier. Both the H1 and the Dominator are Class 3 trucks, but the Dominator has a gross vehicle weight of 12,800 pounds, compared with the H1's 10,300 pounds.
Smith hopes consumers and auto dealers share his view. He plans to sign up hundreds of retailers in the U.S., Canada and Mexico at $50,000 each to sell the truck. Then, in addition to cracking the U.S. market, he has larger plans. He wants to offer the vehicle internationally, cracking overseas markets wherever he can.