Chinese cars for Europe

Last year China overtook the United States as the world’s biggest car market, buying 13.6 million vehicles in 2009. Chinese car producers are also exporting cars to developing countries and now they are starting to make inroads into the lucrative European market. A joint venture in Bulgaria will produce the first Chinese brand cars in the European Union. From Bahovitsa, Bulgaria, Matthew Brunwasser reports.

(image: Great Wall Motors)

In this promotional corporate video, Great Wall Motor Company leaves no room for doubt about its ambitions.

CORPORATE VIDEO: “Great wall motors has been accelerating its pace on the way of internationalization with magnificent strategy and competitive strength. In this era of opportunity and challenge, great wall motor will keep the future in view and adopt various advanced experiences from home and abroad.”

For Great Wall, the long march to Europe starts in an unlikely place: Bahovitsa, Bulgaria. Not long ago this was an idyllic cow pasture.

A worker joins steel beams together, helping build the enormous skeleton of the future assembly plant for Great Wall, the first Chinese car brand to be produced in the European Union. Production manager Plamen Likyov shows me around.

Likyov: “At the beginning, the first two halls will be built. A final assembly hall and a logistics facility. Then in the middle of next year, they will start to build the other two halls: a painting plant and a facility for welding.”

This plant will produce 50,000 cars per year of three Great Wall models: a pickup, an SUV and a sedan. Great Wall Motors started producing trucks in 1991 and sold its first sedan in 2008. Today their Hover SUV is the second best selling vehicle in China. The company focuses mainly on the Chinese market and the developing world but now they’re branching out.

Ilia Terziev is executive director of Litex Motors, Great Wall’s Bulgarian partner. Litex works in sugar, fruit juice, real estate and tourism among other things. The company was founded by a Bulgarian wrestler who got very rich very fast in the 1990s and now wants to produce cars in his home town. Litex put up 90% of the money for the factory.

Terziev says Litex came up with this idea after considering different factors: the company wanted to produce cars in Bulgaria and they wanted to find cheaper cars to sell locally, since the Balkan market can only afford cheap cars. The Bulgaria project was said to cost 130 million dollars, small potatoes compared to other moves by Chinese car companies.

Geely bought Volvo in March for $ 1.8 billion. It was the first big global auto brand purchased by a Chinese company. The once bankrupt British car maker MG was also bought by a Chinese company and could restart production by the end of the year. Andy Liu from the European department of Great Wall says the company is pretty happy with the EU partnership.

Liu: “The location is very convenient for us because Bulgaria is part of the EU, and it would be very convenient for us to expand our sales in European markets.”

The EU common market means that anything produced within its borders can be sold freely without quotas between all 27 EU member countries. David Sedgewick is an editor with Automotive News China. He says that cheaply made cars may do well in the Balkans, but they’ll have limited appeal in wealthier countries.

Sedgewick: “In the short run, the Chinese automakers aren’t going to pose any significant threat to European auto makers in western Europe or North America or Japan over the next 5 years. That’s just not very likely. They are not ready for that.”

Sedgewick says the Bulgarian factory is little more than a screwdriver plant, with little automation or sophistication. But still it’s a big step to produce cars in the EU – the world’s biggest market.

Sedgewick: “You start at the bottom and work your way up, that’s what the japanese automakers did 50 years ago. its what Hyundai did in the 1980s, that’s the way you start, at the low end and work your way up gradually into the premium segments. I think that’s what the chinese will do.”

VIDEO: “…and with persistent pursuit, stable operation and exquisite products, great wall motors together with china auto industry will strive for the global market..”

While Great Wall stresses the company’s readiness to conquer foreign markets… it still has many miles to go.