LOS ANGELES — HAAH Automotive Holdings’ resolution to surrender making an attempt to import Chinese language vehicles to U.S. showrooms is the most recent in a historical past of would-be distributors which have underestimated the problem of such an endeavor.
However HAAH’s failure is also prone to dampen future makes an attempt by others — not less than within the present political local weather.
HAAH CEO Duke Hale informed Automotive Information that his seven-year labor proved unattainable, given rocky U.S.-China relations. Along with rising political and financial skirmishes between the 2 nations, Chinese language automobiles now bear a 27.5 % tariff to enter the U.S.
“All of our huge traders, all of them, have moved away from the deal due to U.S.-China relations,” Hale stated. “They don’t see it as the suitable place to take a position.”
Hale informed sellers early final week that HAAH could be liquidated by chapter after failing to boost about $200 million wanted to maneuver forward together with his plan to import automobiles from China’s Chery Vehicle Co.
However as of press time, Automotive Information was unable to substantiate {that a} chapter petition had been filed, and Hale declined to remark additional about it. HAAH’s potential U.S. sellers stand to lose nonrefundable deposits for franchises that ranged from $100,000 to greater than $1 million, primarily based on the variety of gross sales factors and their location.
Hale stated he’s transferring on to a brand new enterprise known as Cardinal One Motors that intends to make a bid to accumulate the ailing Korean automaker Ssang-Yong Motor Co., which is in court docket receivership awaiting a rescue plan.
However Korean imports are unlikely to be a satisfying substitute for the decades-long attraction that China has been for a collection of would-be distributors. China has dozens of automakers that would probably promote within the U.S. whereas almost the entire Korean ones have already arrange store.
Michael Dunne, CEO of the ZoZo Go consultancy that makes a speciality of Asian automotive commerce, characterised the failed HAAH deal as the tip of the road for artistic schemes to get Chinese language-brand vehicles into the palms of U.S. shoppers. These makes an attempt date again to not less than 2005, generally spurred by the automakers and generally by would-be distributors.
“The times of sunshine tariffs, loopholes and workarounds are gone,” Dunne wrote in his publication final week. “To win U.S. shoppers, Chinese language automakers should do what the Japanese, Koreans and Germans (and most not too long ago Volvo) have executed: construct vehicles and vehicles in America.”
Volvo’s mum or dad firm is Chinese language automaker Zhejiang Geely Holding. Geely exports one Volvo mannequin from China to the U.S. and one Polestar mannequin. However extra importantly, Volvo is investing $700 million at its Ridge-ville, S.C., plant to construct the electrical automobiles that can dominate its future lineup. Common Motors additionally imports one Buick mannequin from China.
HAAH’s marketing strategy shifted because it tried to herald Chinese language automobiles. At one level, HAAH labored to import automobiles from Zotye Vehicle Co. It later proposed assembling crossovers within the U.S. from its newer Chinese language companion, Chery Vehicle Co. HAAH created two new U.S. manufacturers, Vantas and T-GO, to market the Chery crossovers.
For some time final yr, Hale and different HAAH executives touted a “Made in America” plan as a approach to scale back the affect of the 27.5 % tariff on Chinese language auto imports whereas additionally making a consumer-friendly message of native hires. However a U.S. manufacturing facility was by no means introduced and HAAH returned to the import plan this yr.
One seller who had been enthusiastic concerning the “Made in America” label was Larry Battison, seller principal at Battison Honda in Oklahoma Metropolis. He positioned deposits for 2 gross sales factors for a complete of $300,000.
Through the course of 2020, HAAH had stated it was doing a nationwide seek for an present manufacturing facility to assemble the Chery automobiles utilizing semi-knockdown kits, that are mainly containers with all of the components wanted to construct the automobiles. HAAH promised that native content material would improve over time because it established a U.S. provide chain.
HAAH stated it narrowed down its website search to 3 potentialities, however it by no means introduced a manufacturing facility alternative.
“I am simply deeply disenchanted,” Battison stated final week after HAAH pulled the plug on the deal. “The entire time we had been strung alongside about discovering a plant to construct vehicles or assemble kits in the USA and that they had been in search of a components distribution warehouse. Nevertheless it was all speak and little or no motion.”
Battison stated he understood the chance concerned and that he was extra upset concerning the optimistic message by HAAH proper up till the enterprise fell aside.
“I do not assume it was fraud, however I believe it was making some assumptions that had been overly optimistic and main the seller physique to assume they had been additional alongside than they actually had been,” Battison stated.
Hale stated Battison and different sellers had been by no means misled. Hale pointed to potential Vantas and T-GO sellers who had been extra understanding of the challenges HAAH confronted, equivalent to George DeMontrond, president of DeMontrond Auto Group within the Houston space.
DeMontrond stated final week that he was disenchanted concerning the failure to carry the brand new manufacturers to the U.S. market and about shedding his group’s deposit on 5 gross sales factors. However he would not blame Hale and HAAH.
“My feeling about Duke and HAAH continues to be very optimistic,” DeMontrond stated. “I believe they did every part they probably might to make the deal occur.”
DeMontrond stated he would preserve an open thoughts on Hale’s newest enterprise with SsangYong. Ought to Hale come trying to recruit U.S. sellers for the Korean model, DeMontrond stated he’ll check out the proposal.
The potential SsangYong deal might carry the Korean automaker’s automobiles to the U.S. and Canadian markets extra simply than the Chinese language manufacturers, Hale stated, as a result of the U.S. and South Korea have a free commerce settlement. Meaning no tariffs and little pressure.
“You do not have the massive tariff drawback,” Hale stated. “You might have nice relations between Korea and the U.S. It is a completely different ballgame. And Korean high quality is seen by the American shopper as superb.”
Hale stated he’s advising an funding group that plans to make a bid on SsangYong by the tip of this month, the latest deadline set by the chapter court docket.
Hale stated the SsangYong bid is prone to require elevating $250 million to $350 million, along with potential assist from Korean monetary establishments, together with the Korean Growth Financial institution. About 4,500 jobs are at stake in Korea, Hale stated.
“We’re positioned in Korea the place, possibly if we increase cash, we get some more cash that will stream into the corporate,” he stated, with out figuring out the place the extra cash would come from.
HAAH’s curiosity in SsangYong began a yr in the past, Hale stated, however his new Cardinal One group has taken over the potential enterprise deal. Hale stated HAAH would file chapter however he declined to remark additional on the recommendation of counsel. HAAH’s U.S. sellers are usually not a part of the potential Korean enterprise, he stated.
“Cardinal One Motors has nothing to do with HAAH,” Hale stated final week. “It’s a distinctly separate entity and it is a new entity. And that entity shall be within the technique of submitting a letter of intent for the acquisition of SsangYong Motors.”