VW Paved the Way for Import Franchises; China is Up Next

Last Updated Jan 26, 2010 2:10 PM EST

It sounds odd, but Chinese cars, whenever they finally arrive in the United States, will owe a big debt of gratitude to the Volkswagen franchise of the Swinging Sixties.

That's because two or three generations of American car dealers heard their fathers and grandfathers moan that they had passed up a gold mine: "If only I had taken a Volkswagen franchise when I had the chance!"

That cry has helped persuade dealers to take a chance on obscure import brands for more than 40 years, on the off chance that they might be "the next Volkswagen." Over the years, that appeal helped sell franchises for Japanese cars, Korean cars, Yugo franchises, and at least one car that never made it to America at all despite more than decade of trying, an SUV from Romania called the Aro.

If nothing else, the "VW Effect" motivates dealers to sew up a franchise to keep the dealer down the street from getting it.

Chinese cars are only the latest beneficiaries, as Chinese companies like BYD seek to sign up U.S. dealers.

Signing up the right dealers nowadays is a life-or-death step for a would-be importer. Through the mid-1960s, when Chrysler, Ford and GM ruled the U.S. market, import brands - even relatively premium brands like Jaguar or Volvo -- had to content themselves in some U.S. markets with just about anybody they could get to represent the brand, including repair shops and gas stations.

Today, customers for even the cheapest brands are much more demanding, not to mention litigious. Auto manufacturers and their dealers also carry a much heavier burden in terms of satisfying U.S. government regulations for safety and emissions equipment.

So even with the "VW Effect" to keep dealers interested, starting up a U.S. franchise requires time, deep pockets and a lot of local-market savvy. South Korea's Daewoo, for instance, failed miserably in the late 1990s with an experiment where Daewoo planned to use college students to sell cars, in place of traditional dealerships and sales people. Daewoo products are still being sold in the United States, but they are rebadged as GM brands.

With this background in mind, I was disappointed at the Detroit auto show earlier this month to hear BYD seemingly dismiss all those potential pitfalls. The Chinese automaker says it wants to start selling cars in the United States as soon as this year. However, a BYD spokesman at the Detroit show refused to identify BYD's U.S. dealers, or even to say how many U.S. dealers the company has, or in what markets.

"We don't see distribution as a huge problem," said Paul Lin, a BYD spokesman. Unless the company has a U.S. network in place and just wants to keep it quiet - which is conceivable, I guess -- it's hard to see how the company expects to start selling cars in this market any time soon.

Photo: BYD