Sat, Jun 28, 2003 page12

• General Motors irritated by Chery's `copycat cars'

  • REUTERS
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  Foreigners have long railed against pirated software and CDs in China. The latest complaint? Copycat cars.

  Automakers in the country's booming vehicle sector, frustrated with what they deem intellectual property theft, suddenly face a new threat: the copying of cars, which take anywhere from US$500 million to US$2 billion to design from scratch.

  General Motors says it is investigating media allegations domestic car producer Chery's just-launched "QQ" minicar bears a striking resemblance to GM's Chevrolet Spark, due to enter the market later this year.

  SAIC-Chery Automobile Co Ltd, which sold 50,000 cars last year, denies the allegation.

  The Spark is based on the Matiz, made by GM's South Korean unit GM Daewoo Automotive and Technology Co, so experts reckon it cost little to adapt for China. The Matiz probably cost some US$500 million to develop, according to car consultancy Autopolis.

  "The bad guys are becoming cleverer," said Ben Goodger at intellectual property consultancy Rouse & Co International. "As the market matures, you are getting more mature attempts to rip off other people's intellectual property rights."

  "The big players are going to have to be much more sophisticated in taking action," he said "We're talking about suing people."

  Besides GM, Toyota Motor Corp, Honda Motor Co and Volkswagen AG have also been ensnared in disputes as they pursue a market where car sales leapt 56 percent last year to break the million barrier for the first time.

  "The Chery case is a little bit unique," said a senior executive with a rival automaker.

  "All I can say is, it's really worth the effort of all parties to look into this," he said.

  GM executives say they told Chery about a year ago they would "not appreciate" them copying GM's products, without referring to any specific model, and that Chery assured them it would not.

  "We're concerned about public and media comment that the two vehicles look very similar," said Daphne Zheng, GM's China spokeswoman. "We need to look at the ramifications."

  The irony is that Chery is 20 percent owned by Shanghai Automotive Industry Corp -- GM's main joint venture partner.

  "It takes balls to do what they have done," said one lawyer familiar with the situation. "GM had better take this very seriously."

  The Chery dispute follows other high-profile disputes over intellectual property theft or violations of copyright in a land where copying -- from DVDs to goods on supermarket shelves -- is rife.

  It is hard to copy a car: the reverse engineering would have to involve the complicity of systems suppliers, or a direct exchange of designs between a company and its would-be imitator.

  Most piracy in the industry now centers on parts like brakes and windshields and can be hard to detect, legal experts said.

  But they do not discount the possibility.

  Chery has had its share of controversy.

  Last year, Volkswagen said parts produced by the German company had been used illegally in one of Chery's cars.

  The Chinese firm said it used technology bought legally from Volkswagen, which finally agreed with Chery suppliers that they would stop using original VW components.

  Yet another complaint revolves around the Geely Group and top Japanese automaker Toyota, which is demanding 14 million yuan (US$1.7 million) from Geely for using a logo similar to Toyota's in its "Meiri" sedan line, a charge Geely denied.

  Foreign automakers "have said to me they view the counterfeiters as their largest and most threatening competitor," said Bill Thompson of Pinkerton Consulting and Investigations.

  But he said the government realized it needed to protect intellectual property rights as China moves up the manufacturing chain.

  "That is, unless they want to make cheap plastic shoes for the rest of their life," he said.
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