China's Zotye plans to begin U.S. sales with budget SUV
China's Zotye Automobile International has begun recruiting U.S. dealers and aims to bring a budget crossover to America in 2020.
If successful, the effort could mark the long-awaited debut of a Chinese auto brand in the United States. Most recently, Guangzhou Automotive Group had been aiming at a 2019 entry but said last month that new U.S. tariffs would likely delay its arrival until 2020.
The distributor will be Zotye USA of Lake Forest, California, which is led by former Mazda and Volvo executive Duke Hale, owner of HAAH Automotive Holdings, Hale said in a statement Tuesday. Longtime Hyundai Motor America executive Bob Pradzinski will be senior vice president of sales. The company will also handle parts and service.
Zotye USA is a unit of HAAH Automotive Holdings, founded by Hale in 2014 to develop U.S. sales networks for foreign brands. Its first client was Dubai's W Motors, which produces low-volume sports cars.
HAAH's second client is Zotye (pronounced Zo-tay), which plans to announce its first batch of about 20 franchised dealers next month, Hale said. "We'll provide flexibility" to dealers, he said. "We're looking at different ways to do business, as opposed to the old brick-and-mortar approach."
According to Hale, Zotye is studying out-of-the-box marketing approaches championed by brands such as Saturn and Tesla.
Saturn was a leading proponent of no-haggle pricing before being axed as part of General Motors' 2009 bankruptcy. Tesla has minimized its showroom investment by showcasing models in shopping malls and other locales and bypassing the traditional franchise system.
To help run Zotye USA, Hale has hired Pradzinski, a 26-year veteran of Hyundai. Pradzinski rose to the No. 2 position at Hyundai Motor America before departing in 2015.
HAAH "is a disruptor, and we will be adding innovative features and processes to the customer and franchise dealer system," Pradzinski said in the statement.
Pradzinski's experience should prove relevant. Zotye intends to price its models "substantially below" competitors such as Hyundai, Kia and Mazda, Hale told Automotive News, a sister publication of Automotive News Europe.
According to HAAH's website, the first U.S. model will be the T600, a five-door crossover that debuted in China in 2013. Analysts have noted the body's resemblance to the Audi Q5, while the front end is similar to the Volkswagen Toureg.
In China, prices range from $11,700 to $20,200, the site says.
But Hale said the automaker has not yet decided which vehicle it will sell.
In any event, Zotye will position itself as a value brand -- despite new 25 percent U.S. tariffs on Chinese auto imports. To do so, Zotye and HAAH would absorb at least part of the tariff's cost, Hale said.
"Even if the tariffs go forward, it won't stop our deal," he vowed.
Zotye produces passenger cars, light commercial vehicles and cargo trucks. Last year, global sales totaled 317,000 units, down 4.8 percent from 2016.
In its home market, Zotye is much smaller than such rivals as Geely, GAC and Great Wall. Zotye exports a relatively small number of vehicles to the Middle East, Africa and South America and is not a big player in Europe.
Zotye "would be in the second tier of automakers," said Michael Dunne, principal of ZoZo Go, an investment advisory firm that specializes in the Chinese auto industry. "They are fast-moving but not quite established."
Last year, Ford formed a 50-50 joint venture with Zotye to produce and sell electric vehicles in China.
"They convinced Ford to be their partner," Dunne noted, "so there has to be some substance there."
Tuesday's announcement adds Zotye, located in the east China city of Yongkang, to the list of Chinese auto companies that have openly stated intentions of selling Chinese brands in the United States.
So far, no brands have arrived.
Before the recession, automakers including Geely, Chery Automobile and BYD Auto spoke of cracking the U.S. auto market with an array of low-cost passenger vehicles.
Geely eventually did export to the U.S. from China -- but through Sweden's Volvo, which the Chinese automaker acquired from Ford in 2010.