Fortune cookies and cars

China is big no matter how you measure it. Powered by 1.3 billion people, the world’s largest economy moved ahead of the United States as the world’s largest automotive market in terms of sales and production in 2009.

Almost 20 million passenger cars were manufactured in China last year – nearly five times total US production.

But can you name a Chinese car brand? BYD may come to mind because Warren Buffett through Berkshire-Hathaway holds 225 million shares.

Or you may know of Great Wall, the first Chinese brand to arrive here five years ago with a procession of cheap utes and an SUV, sales of which have since dwindled. The company recently established an Australian headquarters in Melbourne to begin marketing its Haval-branded range of luxury SUVs.

Or maybe you know of Geely after it purchased Volvo Cars from Ford for $US1.8 billion in 2010, leading the industry to ask “What just happened?” It was the most significant recent takeover in an industry that’s lived through many interesting takeovers.

Like the Japanese in the 1960s and 1970s, and like the Koreans in the 1980s, the Chinese too are coming. The design, technology and build quality of Chinese-built cars is improving quickly.

Of the dozen or more major car-makers in China, none is a big exporter. Even more telling is that none ranks in the top 10 in sales within the Chinese domestic market. Those positions are dominated by foreign brands: Volkswagen, Chevrolet, Toyota, Buick and Nissan.

Cash-rich and brand-conscious Chinese consumers prefer to buy foreign brands underlined by higher quality, better design, safety and kerbside cache. But that is changing.

Guy Burgoyne is English by birth and Australian by marriage, and almost three years ago he was hired by Peter Horbury, Vice President Design Volvo Cars, as interior design chief at Geely.

Eighteen months ago he was promoted to Design Director, Geely Design China, to take design control of Geely’s domestic product range. The role includes transforming Geely’s Shanghai studio into a world-class facility that will lift Geely from a local to a global brand.

He talks about bringing Geely’s suppliers in-house and developing a closer working relationship to quicken development as well as improve quality. He talks about tapping into China’s rich design culture and hiring talented Chinese designers to work alongside international designers. He talks about the challenges of simple communication when so many on his staff don’t speak English nor share a similar culture.

Geely’s design studio is not surrounded by cool cafes in 90-year-old art-deco buildings within the historic and trendy French Concession of Shanghai. The walls are not covered with images of brand heritage or race wins or marketing photos of happy customers. The guts of the studio are fresh, bare, simple and industrial.

Burgoyne points to a sheet of white paper Blu-Tacked to the wall: “This is a list of the projects we’re currently working on.” It is long, and he doesn’t let me move closer to read it. The pace is demanding.

The studio is finishing preproduction work on a mid-size SUV and hatch (both revealed as concepts in 2014). The SUV is expected to launch in China during Q4 as the NL-3. Early prototypes have undergone development testing in Australia but Geely has not confirmed export plans for the XC60-sized SUV.

Geely more recently revealed a mid-size sedan – the Emgrand – in April. The exterior design is credited to Australian Brett Patterson and shows an obvious separation of Geely from Volvo.

Burgoyne is also concentrating on production refinements on the new GC9 full-sized sedan that was launched mid-year in China.

The little things unify the brand’s design, and Burgoyne is focused on expressing Geely as a Chinese brand as well as a mature automotive brand although it is almost as young as Tesla.

He draws attention to a new blue and gold badge affixed to the GC9’s pebble-in-pond grille. “We’re developing a brand identity and that starts with the new badge.”

The interior visually delivers above the GC9’s $A28,000-$50,000 price range with reasonable engine choices. Look closely and there are subtle, traditional repetitive patterns – obviously Chinese – that create the speaker covers and accent the steering wheel hub. The GC9’s interior is clean and organised and Euro-ish with dark wood framed by highly polished aluminium.

We take a short drive. The back seat is very comfortable with ample legroom, based on Geely's own KC platform it offers plenty of interior real estate. The ride certainly feels preproduction and unsettled but otherwise the GC9 represents a pretty damn serious challenge to the foreign brands manufacturing in China.

Burgoyne mentions the GC9’s ride quality is being revised with development input from Australia. Shutting the door on Holden, Ford and Toyota manufacturing in Australia has created an abundance of talented suspension and drivetrain engineers, and many are busy offering their expertise to Geely and other independent Chinese auto-makers. Victorian-based Premcar, a division of Prodrive, is believed to be working with Geely.

Geely already owns Drivetrain System International (DSI) with manufacturing based in Albury, NSW.

Before Burgoyne dashes off to a meeting, he mentions: “We’ve made massive changes in how the company works in a development process.” As if to say, stay tuned.

For comparison, the China-built Cadillac ATS-L (long-wheelbase) powered by a 205kW 2.0-litre four-cylinder turbo-petrol engine starts at $A63,000 and runs to $101K. Build quality and paint finish is excellent, better than the Michigan-built CTS that sits alongside the ATS-L in Chinese showrooms.

It seems inevitable that Geely, BYD, Chery and Great Wall will turn their attentions to increasing exports, especially as China's growth continues to slow.

The progression from local to international has been proven by the Japanese and Korean brands, and Chinese manufacturers like Geely are far better prepared for export than was Hyundai in the early 1980s.

It's no coincidence then that West Australian car dealer John Hughes, who was instrumental in bringing Hyundai to Australia, is also the man behind distributing Geely cars here, so far with a single compact model available only in Perth.

But Kevin Wale, who as the chief of GM China from 2005 to 2012 has a unique insight into China’s automotive industry, doubts Chinese manufacturers are ready to enter Western markets.

“Not yet," he says. "To put it in perspective, Geely and BYD are local brands and have been losing significant market share and absolute volume in China in the last couple of years.

"So they’ve got much bigger problems which is called ‘learning to survive in the domestic market’ before they have the time or the business opportunity to focus on exports.”

Still talking about export strategies, Wale continues: “BYD and Geely are two different psychologies behind what they are trying to do.

"BYD and the Buffett connection, and Wang Chuanfu, BYD founder and CEO, is a very strong leader and globally focused, so I don’t have any doubt that BYD still has an eye on exports and North America. If the timing is right and the stars align they’d be happy to go into the US and other markets.”

And Geely? “Geely is all about ‘can we establish ourselves and distinguish ourselves from Chery and BYD by selling in the US and foreign markets?'

“So I think the reason for Geely investing so heavily in design is that they desperately need to get their branding correct locally and bring sophistication into their design that creates demand.

"Korea went through the same issue if you remember. Korea had functional cars but not design capability.”

Riding in the BYD Qin Hybrid
Most westerners don’t drive in China, but the BYD salesman keen to practice his English offers me a test ride in BYD’s Qin plug-in petrol-electric hybrid, which has a small battery pack tucked neatly into the boot, limiting its electric driving range to less than 100km.

The Qin is an innocent looking mid-size sedan priced from $A32,000 in China (with the support of $13K in government incentives) and its interior materials and colours are unlikely to appeal to Western standards.

Overall, however, the hybridised 113kW 1.5-litre turbo-petrol engine and 13kWh battery pack promise city mileage of just 1.6L/100km, claims BYD, and 0-100km/h acceleration in only 5.9 seconds.

Toyota Australia's base Camry Hybrid offers more for a similar asking price, which is more or less the problem with BYD’s technology. Its battery tech isn’t as potent as that used by Tesla's Model S, BMW's i3, Chevrolet's Volt and the Nissan LEAF.

So far BYD doesn’t offer a cost competitive and technologically tempting package to draw Western consumers from familiar brands. The company seemed to realise that in 2011 when it pulled the plug – pun intended – on export plans for its FD3M plug-in hybrid into California.

However, Wale predicts it's only a matter of time before Chinese car-makers develop into legitimate global brands.

“I do think the West is underplaying the ability of the Chinese to continue to evolve as a serious competitor. They are already very effective on the automotive global supply base.

“Long-term no-one thought the Japanese would do any good. No one thought the Koreans would do any good. No-one thinks the Chinese can do any good.

“People still assume China is a third-world country and that they operate on cost and forced labour, which you know is so far from the truth that it is not funny.

“China has on average the best, most modern automotive factories in the world. They have the youngest and increasingly the most educated workforce in the world.

"When you start to add depth of experience to depth in technical work – which will take 10 to 15 years – then you’ve got a fairly competitive scenario."