QQ: a Car Story

QQ

Chery (奇瑞), a car manufacturer in China, introduced this tiny gem in 2002. The key reason for its wild success is the whopping 40,000 price — no, not in US dollars, China Yuan (or RMB). That's US$5k. For this price, I could get one for my daughter's driving lessons. Too bad she must be 18 to even practice driving in China (sorry, honey).

Outside of US, car manufacturers battle in this micro-car segment. They are cheap, fuel-efficient, easy to repair, maneuverable, parkable, and much more comfortable than motocycles.

Chery's car is called QQ, just like the wildly popular Web2.0 services that boast 400 millions subscribers. This is not lost among those who have access to Internet here in China. Legally, TenCent (腾讯) has claimed this QQ name for over 45 product categories – automobile is not one of them. Chery tried to grab it. TenCent objected. They are now in intense negotiation.


A Buick minivan facilitates my daily commutes. I grew to dislike minivans few years ago. Cars should be an artful balance of form and function. Minivans are too far over the function end. They have reached the limits of legality and amateur driving skills. One extra milimeter, there will be too many fender-benders or violation of the category dimension limit. These days, car makers try hard to differentiate on colors and cup holders.

GM builds my minivan, called GL8, in ShangHai. It is very popular where I live. Every morning, there will be 4 or 5 of them fighting for the “take off” sequence. Kids disappear into it and get hurried away. Commuters, mostly family men, patiently queue behind them.
Last I chatted with someone in the knows, it costs RMB450,000 (US$56,250) to drive one of them off the dealer's parking lot. That's a lot more than what your suburban neighbors would pay.


GM is doing well in China. It's market share reached 12.5% in 2006. Shanghai Automotive Industry Corp. (SAIC), GM's partner in China, manufactured and sold over 200,000 of Buicks, Chevolets, and Cadillacs in first 6 months of 2006. In 2001, SAIC acquired Wuling Automotive (五菱) for the micro-car category, and completed its product lines in China. Wuling will make Chevolet Spark, originally Maitz, made by Korea's Daewoo (大宇) that GM acquired in 2002. GM shall win in this segment. So it hoped.

China is the fastest growing car market in the world. During the 1st half of 2006, passenger cars sales grew 44%. Volkswagen is the largest brand here, with market share of 17.1%. Micro category is a key element in GM's plan. We all know GM needs market shares.

That is probably why GM sued Chery in 2002 over design infringements. After about a year, State Intellectural Property Office ( 国家知识产权局) threw out the case. GM never applied for an “appearance patent” and failed to deliver any evidence of infringement. The fact that these two cars are similar does not consitute infringement, by China laws (actually, by US laws too. Remember Microsoft won the Apple lawsuit on “look and feel” infringement?)

GM questioned QQ's quality in public. Feisty Chery challenged back with head to head tests. In crash and one road tests, QQ either rivaled or out-performed Spark. GM did not accept the legitimacy of those tests. Industry insiders believed GM sells Spark at lost. The lawsuit lasted 3 years and settled late 2005. During these years, QQ outsold Spark about 6 to 1.

Chery is pushing its car abroad aggressively and eyeing US as the primary target. If the 1st micro-car in your neighborhood dealership is QQ. I will not be surprised.

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