Did Spark Spark A Copycat?

It's close to noon on a sunny January day, and the Chery dealership at the Asian Games Village car market in north Beijing is bustling. That's because the price of the popular Chery QQ minicar was just slashed by as much as $725, to a highly affordable $3,600. "The best thing is the low price," says one customer preparing to buy a gray QQ, which he says has "a fashionable shape."

General Motors Corp. (GM ) execs would agree with that -- which is why they're apoplectic. GM Daewoo Auto & Technology Co., the Korean subsidiary of GM, says the QQ is a knockoff of its own Matiz minicar, sold in China as the Chevrolet Spark since 2003. "The cars are more than similar," says Rob Leggat, vice-president for corporate affairs at GM Daewoo. "It really approaches being an exact copy." Same cute, snubby nose. Same bug-eyed headlights. Same rounded, high back. And most components in the QQ, Leggat says, can easily be interchanged with parts on the Spark. So on Dec. 16, GM Daewoo filed suit in a Shanghai court alleging that Chery Automobile Co. stole its trade secrets to make the QQ. Chery declined to comment.

This isn't the first time a foreign auto maker has felt ripped off in China. In 2003, Toyota Motor Corp. (TM ) sued Hangzhou-based Geely Group Co. for copying the Japanese company's logo and slapping it on Geely models. Toyota lost the case. Yet Honda Motor Co. (HMC ) in December won a ruling that bars Chongqing Lifan Industrial from selling motorcycles under the "Hongda" brand. Honda is also suing Shuanghuan Automobile Co., saying the Chinese company's Laibao SRV is a copy of the Honda CR-V sport-utility vehicle. "Chinese car companies still have limited [design] capabilities," says Jia Xinguang, an analyst at China National Automotive Industry Consulting & Developing Corp., a consultancy. "That is why so many [of them] copy bigger car companies' models."

Some, though, believe China will need to clean up its act on intellectual property if Chery and other auto makers hope to be successful overseas. "Intellectual-property rights violations will be a major impediment to the aspirations" of Chinese car companies looking to export, says Charlene Barshefsky, former U.S. Trade Representative and now a Washington attorney.

Chery already has global ambitions. Last year the company exported 8,000 vehicles to Cuba, Malaysia, and elsewhere and started assembling cars in Iran. In January, Chery announced plans to export five models, ranging from a compact sedan to an SUV, to the U.S. by 2007 -- though the QQ isn't part of the mix.

At home, the QQ is Chery's mainstay. The model made up 57% of the 87,000 cars it sold in China last year -- outselling the Chevy Spark nearly five to one, according to researcher CSM Asia.

And sales show no sign of slowing. In the first three weeks of January, the Asian Games dealership sold 118 QQs, says manager Zhang Ying, noting that the model costs about $1,000 less than the Spark after the recent discount. With such a price gap, it's unlikely that the Spark will outsell the QQ anytime soon. So GM had better hope it outmaneuvers Chery in court.

By Dexter Roberts in Beijing

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