China's FAW Cars U.S. Ambitions Run Through Mexico

Chinese designed vehicles that are built in Mexico will likely hit the U.S. market within five years, according to Kathleen Ligocki, the former CEO of auto supplier Tower Automotive and a former senior Ford executive who is now CEO of a Mexican company trying to make Chinese cars a reality in the U.S.

Ligocki, speaking at the Automotive News Congress in Detroit on Tuesday, said the cars from GS Auto could launch in Canada before the U.S. and will be sold through a new kind of distribution network that includes big-box retail stores.

GS is building an assembly plant in Michoacan, Mexico with China’s First Auto Works (FAW). The plan is for vehicles to start rolling off the line in 2010. GS sold 4,000 imported Chinese cars in Mexico last year in a kind of pilot program. Sales are being expanded to Latin America, with Canada and the U.S. to follow.

In Mexico, GS is using what Ligocki calls a “hub and spoke” retail system made up of 20 company owned dealerships as well as outlets in Grupo Salina Elektra retail stores. Grupo Salinas is a conglomerate that is the parent of GS Auto.

Ligocki said she believes a similar retail system could work in the U.S.

GS Motors will formally launch the FAW brand in Mexico this year, she said. The F1 Hatchback, the entry level car, is sold for under $5,500. Its most expensive car, the F5 sedan, is sold for less than $9,000.

A handful of Chinese automakers are planning to launch in the U.S. At this week’s North American International Auto Show in Detroit, two Chinese automakers—BYD Auto and Brilliance Auto—are showing vehicles they sell in China to whet the appetite of potential dealers and customers. Neither is expected to have a car or dealers to sell in the U.S. until 2011 at the earliest, but more likely later.

Ligocki said that starting sales in Mexico made more sense than trying to launch in the U.S. where standards for emissions, safety and quality are considerably higher than in Mexico and Latin America.

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