Visionary Vehicles LLC

Industry:	Car & Truck Rental
Revenues:	Under $20 Million
Employees:	Under 99

Description

Visionary Vehicles founder and Chief Executive Officer Malcolm Bricklin hopes to make immediate headway by touting a feature most U.S. consumers covet -- price.

He contends he will field cars, made by Chinese automaker Chery, that will be at least 30 percent cheaper than the competition, including a sedan to compete with the vaunted BMW 3 Series that will cost about $19,000, almost half the BMW 3 Series' starting price.

While most analysts doubt that Bricklin and Chery will be able to meet the more costly and stringent safety and emissions standards for the U.S. market and get production up to speed quickly enough to meet its 2007 target, few doubt that by 2010, Chinese cars will be common on roads here.

It's just not certain that Visionary Vehicles or Bricklin will be the ones to bring them here. The goal of 250,000 cars in 2007 "is simply extremely ambitious to the point of being almost impossible to attain," said Jack Nerad, an analyst with Kelley Blue Book.

"Hyundai just now sold about 180,000 cars on the market and they've been here for a while. And Kia's taken the better part of a decade to reach 200,000 sales a year," he said. "Not only do you have to have a demand for your vehicles, but you need infrastructure, dealers, service and parts to be in place. That's a really massive undertaking."

Part of the skepticism about Bricklin's goal is Bricklin himself.

While he successfully imported the first Subaru here decades ago, Bricklin also brought in the Yugo, widely derided as a piece of junk on wheels.

And when he designed and built his own so-called "safety car" for the U.S. market, the Bricklin, named after himself, it failed miserably, hurt by its poor quality.

"There are two ways to look at Bricklin. You could say all that was a learning experience for him and his organization. Or another way to look at it is that it is his mode of operation to exploit things for a short period of time as opposed to building a lasting business. I don't know which one is which yet," Morici said.

Auto analysts also are skeptical about Chery, which sold only 80,000 cars in China last year. Its sales rose only 2 percent last year in a Chinese auto market that saw sales jump a healthy 14 percent.

The best bet for a Chinese automaker to make inroads in the United States would to be avoid competing across the board and instead focus on the low end of the market, which is what both the Japanese and Korean automakers did, analysts say.

"The whole question with regard to Chery is whether or not their cars are high enough quality when they arrive," Morici said. "The U.S. market is even more demanding now than in years past about quality. They have to hit the quality metrics right off the bat. They will have to beat Hyundai on price and match them on quality."

Chery will have some definite advantages to work with, analysts note, as will any Chinese auto company planning to come to the U.S. market. The most obvious, of course, is costs along a range of fronts, starting with labor.

"On the production side, I would say lower labor costs are an obvious and huge advantage that they have," said Nerad, of Kelley Blue Book. China "has a large, willing work force" that's paid a fraction of U.S. levels.

Chinese auto manufacturers also face environmental standards that are much less stringent than elsewhere in the world, further contributing to lower production costs that can be passed on to consumers as lower car prices.

In addition, Chinese manufacturing exports are benefitting from a currency policy that keeps the dollar high in price relative to China's yuan, making imports into the United States less expensive and U.S. exports to China more expensive.

However, China's strategy of pegging the yuan's value to the dollar has come under fire and could change.

Lastly, since American companies have been outsourcing production of parts and components to China for years, Chinese car companies now have access to parts that cost considerably less, further giving them a price advantage.

"I know by outsourcing supplier jobs, [General Motors is] basically building a supply chain in China that will result in China building cars that will compete with GM products here," Morici said. "That's what we did with Korea. We basically helped the Koreans get into the car business, and now we're doing the same thing with the Chinese."

China, with its 1.5 billion potential car buyers assuming more growth, is the world's most populous nation and in a few years will be the second largest auto market, ahead of Japan but behind the United States. What's more, its middle class has begun to emerge only in the last few years, meaning the people's best consumer years may be just ahead of them.

The first factory making cars was First Automotive Works, which opened in 1953. While growth in sales skyrocketed to 80 percent in 2003 over the previous year, it slowed to an estimated 20 percent growth in sales in 2004. The actual number of carmakers in the country ranges from 37 to 200, according to various sources. There is no definitive source.

Since the late 1980s and early '90s, a variety of automakers headed to China to sell their cars, drawn by the huge potential of a vast population freeing itself from the snares of communism and anxious to catch up with the rest of the motoring world.