China Syndrome

It costs an auto manufacturer up to $1 billion, sometimes more, just to park that new car, truck, or SUV in your driveway. Why so much? Well, there are the engineering and development costs, the cost of fitting out or constructing the factory to make it, the cost of crash testing and other government-certification work, and the cost of advertising and marketing campaigns to get you interested in the first place. All this before the automaker has received so much as a nickel in return.

So how would you feel if you found out another automaker had copied one of your products, almost down to the last spot weld?

You can laugh at the fake Rolexes and Louis Vuitton bags hawked at tourist destinations around the world. Maybe you've even bought a piece or two. But what you're buying is stolen property. Not the item itself, which was probably knocked together in an Asian sweatshop, but the idea behind it.

Intellectual property theft is big business--some estimates put the cost to U.S. companies alone at more than $3 billion a year. It's not just watches and handbags: Jewelry, clothes, CDs and DVDs are being copied and sold, often to unsuspecting consumers. And now it's automobiles.

GM execs were stunned in 2002 to discover Chinese automaker Chery had launched what appeared to be a copy of its Daewoo-designed Matiz minicar onto the Chinese market. Especially as Chery's car, called the QQ, had gone on sale six months before GM's version, the Chevy Spark, was ready. To add insult to injury, Chery had priced the QQ about $1300 below what GM had planned to charge for the Spark.

GM isn't the only manufacturer to have had a product copied by one of China's aggressive automakers: Honda found its CR-V sport/ute being cloned by Shuanghuan Automobile. Another Chinese automaker, Geely, didn't even bother going to the trouble and expense of ripping-off someone's car. Instead, it designed a badge that looked like Toyota's.

You might think a badge wouldn't fool anyone, but the Chinese market is growing so rapidly many consumers have only limited experience of what they're really buying. Example: A Jaguar executive once told me he was puzzled to hear a Chinese customer praising his new XJ sedan, particularly as the car had just gone on sale in Europe. It was only later the Jaguar man realized his happy customer had actually bought an S-Type.