Michael Dunne is CEO of ZoZo Go, a Hong Kong-based advisory firm providing market assessment, executive briefings and negotiation guidance to Chinese and North American auto firms. He is the former president of General Motors Indonesia, past managing director for China at J.D. Power, and author of American Wheels, Chinese Roads.
Every few days I get a call from an automotive executive looking for a straight answer: "When are the Chinese coming?"
In recent days, the questions have become more pointed: "Are the Chinese even coming at all? Won't the Trump tariffs stop them all dead in their tracks?"
But the narrative of Chinese auto firms arriving in the U.S. market is an unusual one, different from how Japanese and Korean companies entered North America. In the 1980s and 1990s, the likes of Toyota, Nissan, Honda and Hyundai first exported from home, then built transplants in the U.S. Over time, the automakers were followed by their families of suppliers. Then came r&d centers.
With the Chinese, entry into the U.S. is happening in reverse order. You already can find scores of Chinese suppliers employing tens of thousands of people at manufacturing locations all along the I-75 corridor. And Silicon Valley is dotted with Chinese tech firms developing world-class expertise in electric and autonomous vehicles.
So where are the automakers?
It is true that we see no Chinese cars on American roads, unless you count Volvo. But several Chinese OEMs quietly operate r&d centers in Michigan and San Jose and Los Angeles. The American and Chinese executives working at the design centers are preparing Chinese products for American consumers.
There are other signs that the Chinese are serious. Chinese leaders created a strategic blueprint for the future called Made in China 2025. The goal: dominate key technologies — electric vehicles, autonomous tech, 5G, robotics and artificial intelligence. By 2025, China plans to produce 5 million electric cars a year — half the world's expected total.
To lead in tomorrow's technologies, China needed access to breeding grounds for new tech, places such as Silicon Valley, Michigan and Southern Germany. Chinese officials are clearly encouraging their companies to go global.
When the Made in China 2025 policy was unveiled in 2015, I felt that we were at the beginning of an important new chapter. A giant wave of Chinese companies would soon be pouring into the U.S., Europe and other markets.
So my family of five moved from our home in Asia since 1990 to California, and I formed ZoZo Go to enjoy the ride.
I did not have to wait long. By early 2016, my team of researchers had identified 51 Chinese automakers, suppliers and auto-tech firms with operations in America. Today, that number has more than doubled to 105.
Who are they?
Think of Chinese automotive companies operating in America in three categories: suppliers, tech companies and automakers.
Suppliers: Home away from home
Lining the I-75 manufacturing corridor from Michigan to Georgia are scores of Chinese parts suppliers. They make a range of components including glass, suspension systems, bearings, airbags, tires, sealing parts, anti-vibration components, batteries for electric vehicles, instrument panels, stampings, magnesium die-cast components and power steering systems.
They include leading Chinese supplier names that North American auto executives will want to get familiar with: Wanxiang, Joyson, Fuyao, Yanfeng and Beijing West Industries (BWI).
How did these companies become ensconced in America's manufacturing heartland? Many started out by simply delivering parts to GM, Ford and FCA assembly operations in China in the early 2000s. Now they are present on U.S. soil and supplying the Detroit Three directly. The towns and counties of the Midwest and South are becoming their home away from home.
Chinese firms also have acquired several U.S. suppliers as part of their global expansion strategy. Some examples: Nexteer, Key Safety Systems, Henniges, Meridian Magnesium and A123 Systems.
Tech companies: California base camps
Drive Highway 101 from San Jose to San Francisco, the backbone of Silicon Valley, and you will discover an intense concentration of American auto technology genius: Tesla, Nvidia, Waymo, Intel-Mobileye, Zoox and Cruise.
Much less apparent is the widening net of Chinese electric vehicle and autonomous vehicle companies operating in California.
In the EV space, Chinese-owned SF Motors, BYD, Faraday, Byton and NYSE-listed Nio employ thousands of high-paid Silicon Valley engineers to help them build world-class vehicles.
In the autonomous vehicle arena, you will discover r&d base camps run by several Chinese firms. Of the 59 companies that have permits to test autonomous cars in California, 14 are Chinese-owned.
Leaders in autonomous vehicle research include the Chinese companies Baidu (referred to as "the Google of China"), Pony.ai, Roadstar.ai and TuSimple. Didi (called "the Uber of China") operates a self-driving lab in Sunnyvale.
For these companies, the new name of the game is to "r&d in California and commercialize in China." Once the business is established in their home market, Chinese tech leaders will promote their products and services globally.
Automakers: Prepping entry
It is true that we do not see Chinese-brand cars on U.S. roads — at least not yet. But several major Chinese automakers are actively laying the groundwork for market entry.
Shanghai Auto, Beijing Auto, Geely, Changan, Guangzhou Auto, BYD and Great Wall all have established centers for design and commercial development, mostly in California and Michigan.
Look for the first Chinese cars on American streets in late 2020.
Why not earlier? Trade friction.
The Trump administration's tariffs on Chinese imports have altered the equation, eliminating the companies' export-from-China option. Instead, we can expect Chinese manufacturers to do precisely what Japanese and Korean automakers did to facilitate sales: build assembly factories in North America.
Will the Chinese stay home for a while longer as a result of the trade tensions? Not likely. China's car market has peaked. The days of head-turning growth and profits there are over. China is home to 40 million units of capacity, some 10 million of which is currently idle. They have no choice but to push out.
U.S.-China disputes over trade, currency manipulation, intellectual property and more will no doubt slow the pace of Chinese automotive investment in America.
They already have. But with so many Chinese companies already woven into the fabric of U.S. industry, there is no reversing the trend.
The Chinese have arrived — and more will come.