Dealers nudge into market with low-priced Chinese car

Two opportunity-seeking Des Moines-area car dealers are gearing up for potentially major roles in bringing Chinese cars to American consumers.

Now, they just need something to bring.

Gene Gabus, second-generation patriarch of a family that's dominated Iowa auto sales for years, believes his team may be ready to offer cheap, fuel-efficient Shuanghuan Nobles early next year. A Gabus business associate said the group hopes to sell between 20,000 and 25,000 Noble G4s in America in 2010. A big chunk of those sales will be shaped by Gabus, who stands to control the flow of Noble cars for 27 states, stretching from Ohio to California.

"I think it's going to be big all over," Gabus said of the car he showed off at the Iowa State Fair. "If this car comes it at $12,900, where's its competition? The used-car market? That's a heck of a used car for $12,900, with a warranty."

Holmes pursuing, too

Meanwhile, Max Holmes, a Hyundai and Chevrolet dealer who's spent four years pursuing Chinese vehicles, is banking on a different strategy. Holmes said he's assembled his own network of 63 dealers in 16 states for a plan to distribute as-of-yet-unnamed Chinese cars. He continues to chase the possibility of a cheaper version of the mid-size, four-door sedan that American drivers love.

"It's better to be best than first," Holmes said shortly after betting a doughnut that Gabus won't be selling Chinese cars in January. "I would be surprised, only because I know that it takes a long time to get these vehicles certified."

Gabus considers Holmes a nonplayer: "Mr. Holmes isn't doing anything," Gabus said last week. "I keep telling you that."

Holmes, who formed China Car Distributors Inc. in 2005, has been waiting ever since for Chinese manufacturers to develop a car capable of meeting rigorous U.S. safety and emissions standards. The company's Web site until early this month included glowing references to six Chinese auto makers, tempered with warnings that the car companies wouldn't be ready for the U.S. market until 2011.

The China Car Distributors Web site was shut down shortly after a reporter inquired about the status of Holmes' business.

Holmes, who earlier this year sold his Honda dealership, said he still intends to distribute Chinese cars. He's just not certain how much he wants to tie himself publicly to a particular company.

"We're in the process of evaluating whether or not we want to list the companies we're talking to," Holmes said as he waited for Chinese officials to arrive for a meeting. "Nobody has a car ready. That's the bottom line."
A wait for Chinese cars

Auto industry observers nationwide have been waiting for years for the first wave of imports from China. Rising Far East incomes have made car sales erupt there, and cheap Chinese labor costs make the factories attractive for American importers.

"The Chinese will get here eventually," AutoPacific President George Peterson, an industry analyst, told the New York Times in January. "They are fast learners, fast movers and good implementers when they have accurate blueprints. But right now, they are a generation away from having competitive vehicles, and it appears most of them understand that."

Gabus, who had hoped to have Nobles by September, now said he believes they'll be ready to sell in early 2010. The first shipment of around 400 could come by January.

Gabus said his interest in the car was driven in part by losing his Chrysler franchise in a dealership purge earlier this year.

"I need something to sell," Gabus said. He found a mutual need in Bob Smith, a South Carolina importer with no car experience. Smith assigned Gabus the largest of three Noble distributorships and a territory that covers most of the nation.

Smith said an engineer he hired to make the cars legal on U.S. roads ran into several problems that now appear to have been resolved. According to Gabus, a final round of tests is scheduled for early next month in China.

"We had to jump through some pretty good hoops to get here," Smith said. "Like switching the engine out totally" for a Suzuki engine that already had met U.S. certification.
Many skeptical

Auto industry experts sound skeptical of any January arrival.

"Fewer of these have materialized than have popped up on the scene," said Michelle Krebbs, senior analyst and editor at large for the Edmunds AutoObserver Web site. "Chinese cars are just nowhere ready for the prime time, and the bigger and smarter companies know this."

Gabus' deal with Smith makes him responsible for recruiting and training Noble dealers. He said many former Chrysler, General Motors and Saturn dealers have expressed interest in selling the Chinese cars - as have other car dealers looking to expand their offerings in troubled times. Gabus said he hopes to have 40 dealers by the end of the year.

Gabus, who now operates as Des Moines Motors, heads a family that owns several other local dealerships, including Charles Gabus Ford and Toyota of Des Moines. In addition to the Nobles, Gabus has plans to sell India-made Mahindra pickup trucks, which are expected in February, and China-made Brilliance cars, which are likely to appear at Des Moines Imports.
Past foreign success

Another project, which Gabus won't discuss, also is in the works.

"It's the same thing as when Japan came here," Gabus said of the Chinese cars. "Would anybody 45 years ago, would they have bet their dollar on Japan owning as much of the market as they do today?"

But a slumping American auto industry may make that a risky bet, according to the Ken Chester Jr., president of Motor News Media Corp.

"I think this would be an incredibly difficult time to introduce a new brand into the U.S. marketplace," Chester said. "You'd be making an investment that, basically, if you walk into it, you'd be making a 20-year commitment. ... It's going to take somebody with deep pockets and tremendous patience."

High profit margins should help.

Smith said: "Our cost, quite frankly, is very attractive coming out of China. We can afford to do less volume and do a very good margin. Dealers will make on this small car as much as they could by selling a Mercedes."