China is where, in one form or another and for one reason or another, old cars are shipped. Many cars are recycled for their steel, while others find their mechanicals and tooling reused. Rarely, however, do these reanimated corpses stray outside China’s borders and the vast automotive smorgasbord therein. Those automakers that venture outside of the People’s Republic, such as MG and Haval, offer what at least superficially appears to be a modern product. And then there are exports like the FAW F1, a resurrected 1987 Daihatsu Charade.
Long before Western and Japanese automakers invested heavily in the Chinese market, the many Chinese automakers relied predominantly on cast-off tooling. For example, Audi 100s become Hongqis. The practice has continued in recent times – the 2000 Etsong Lubao QE6400 Ruby was an Austin Maestro, for example – but most of China’s biggest sellers look as modern as anything from the west. In such a thriving market teeming with competitive cars, Chinese companies are finding it harder to flog the cars of yesteryear.
Hongqi L5: the most expensive Chinese car
FAW Group (formerly First Auto Works) is China’s oldest automotive company, one of China’s Big 4 automakers—the others are Changan, Dongfeng and SAIC. FAW owns the Hongqi luxury marque – the first domestically produced passenger car was a Hongqi – and also has joint ventures with Volkswagen, General Motors, Mazda and Toyota.
There are lots of modern cars driving out of FAW factories, but there are also a lot of Tianjin-FAW Xiali N3s. These are more popular in smaller cities and rural areas of China than in the cosmopolitan, Buick and Volkswagen-loving metropolises. The Xiali N3 range, first launched in 1995, is little changed from the featured FAW F1 which is itself little changed from the Daihatsu Charade from whence it came. Tianjin-FAW also sells an assortment of modern-looking cars riding these equally ancient mechanicals. How peculiar that the Charade became so much more prolific after its run as a Daihatsu, its mechanicals and body used also by other Chinese companies like Beijing Hualian and Anda’er.
How did one of China’s least impressive exports end up in Mexico? The launch of FAW in Mexico was the brainchild of a Mexican company called Grupo Salinas. Founded in 1906 as a furniture company, by the 1990s Grupo Salinas had diversified into entertainment and retail. A group of shareholders had ambitions to tap the Mexican car market which, by the mid-2000s, accounted for around a million sales annually. Grupo Salinas identified a gap at the low-end of the market for buyers seeking something simple and reliable, and so the company sought out a Chinese partner.
After negotiations with other automakers, Grupo Salinas decided on FAW Group. The plan was to set up a factory in Michoacán so FAW vehicles could avoid the hefty import duties imposed by the Mexican government. This meant a $100 million investment had to be made and 50,000 vehicles had to be manufactured each year or else any imported vehicles would be subject to duties of 50%, making the budget-oriented cars prohibitively expensive.
The FAW range opened with the F1 in hatchback and sedan variants. There was also the F4 sedan…
…and the more modern-looking F5 sedan. Don’t be fooled by the vaguely contemporary looks—it and the F4 were simply rehashed Charades but they were priced to sell and were aimed directly at low-income consumers. To keep running costs low, the F1 was equipped with a 1.0 three-cylinder engine with 64 hp and 65 ft-lbs; other FAW models had a larger 1.4 four-cylinder.
Fit-and-finish issues, including a misaligned glove compartment lid, are visible even in photos
Financing and insurance were offered by Grupo Salinas’ banking arm, while cars were sold directly by Grupo Salinas-run stores, not by dealer franchises. Sales began in 2008, with Mexican production scheduled to commence in 2010. The F1 range started at around $MX70,000, or just under $MX100,000 in today’s money. For comparison, the cheapest car on sale today in Mexico – the Chevrolet Spark Cargo – is priced at around $MX110,000. These Chinese cars were cheap, but they had to be.
It seemed like a match made in heaven: Grupo Salinas was able to diversify and take a share of the bustling Mexican car market, while FAW obtained a beachhead in Central America from where it could expand into other parts of the region. The state of Michoacán also would be a big winner, with many new jobs available at the new factory. Production capacity would be 100,000 units a year, with a planned factory expansion intended to double that.
Alas, the Global Financial Crisis of 2008 came and shattered these hopes. Fewer people were buying cars, especially not low-income earners. Additionally, the new Chinese cars weren’t trusted by Mexican consumers and FAW also found their cars would not meet US safety and environmental standards, dashing their hopes of expanding north. The initial investment in the Michoacán factory was $150 million but nothing else would be invested: development was stopped and the FAW brand was withdrawn.
The Chinese have mostly stayed out of Mexico since; the only Chinese automaker presently in Mexico is BAIC. You would think it would be easiest to target the low-end of a market and price your cars like they’re at a Black Friday sale at Wal-Mart but, as FAW learned, low-income consumers are much less likely to buy new cars during economic downturns. And it doesn’t help when the product you’re foisting upon them is a tinny, decades-old, low-quality car with a mysterious badge on the hood.
Álvaro Cuervo-Cazurra and Miguel Montoya’s report on The Grupo Salinas-FAW Alliance, which can be found here.
For an exciting trip down the Chinese car market rabbithole, I recommend visiting CarNewsChina.com, a website that specializes in both news and historical features.