Chery QQ vs Chevy Spark copy theft. The true story.
by hans | December 15, 2011 4:24 pm
If you have been following the auto industry for some years, surely you must have come across the two pictures above. You must’ve also known that that the Chery QQ is an illegal copy of the Chevrolet Spark, that Chery cloned the Chevy Spark, naming it QQ, and the Chinese court would later throw out General Motor’s lawsuit against Chery, another example of the Chinese government’s blatant disregard for intellectual property rights. What if we were to tell you that the story you’ve believed is not exactly true?
Like many, I used to think that Chery is guilty of intellectual property theft but was protected by the Chinese government against any charges.
The Chery QQ was launched in China in July 2003, while GM, the owner of the ‘original’ design, only launched its Chevy Spark nearly 6 months later in December 2003. How is it possible that an upstart Chinese car maker is able to copy a car that hasn’t even been launched? Chery certainly didn’t ‘steal’ information from GM’s parts suppliers. In fact, it was the parts suppliers that first alerted GM’s purchasing officers that the GM designs submitted are exactly the same as that provided by Chery, many months earlier.
According to Michael Dunne’s book ‘American Wheels Chinese Roads,’ the actual story of how Chery got hold of the QQ / Spark’s design was never publicly confirmed but anecdotal evidence suggests that Chery did bought the original design from Daewoo via legal means.
Back in 2001, the Asian Financial Crisis of ’97 hammered Korean car makers badly. Daewoo Motors was declared bankrupt in 2000, with an estimated $17 billion in debts. Daewoo went into court receivership and by April 2002, a deal was signed with General Motors to acquire Daewoo Motors for $400 million in cash, forming GM DAT (General Motors Daewoo Automotive Technology).
In between this period, an agent from Taiwan brokered a secret agreement between Chery and a group of senior Daewoo engineers. The engineering data and designs would be transferred to Taiwan, which will then by transferred to Chery’s home city of Wuhu, China, for an undisclosed fee. The senior engineers from Daewoo knew that the company is doomed and is highly unlikely that their hard work will ever make it into production. At that time, it didn’t seem that GM was interested in small cars.
In other words, from the perspective of Chery (and the Chinese court), Chery acquired the designs by legal means, and pushed out the car to market before GM. Some sources even indicated that Chery did sent a letter to GM asking for the rights to produce a licensed copy of the car, but was rejected by GM. GM’s lawyers too did not include any provision to guard against leaking of Daewoo’s designs, an extremely costly mistake on their part.
While it is very obvious that both the QQ and Chevy Spark are clones, proving a case in court is not that straight forward. First GM has to prove that it developed and therefore owned the design. The onus lies with GM to prove that the Spark was developed using GM’s resources, and thus belong to GM. But because the Spark was developed independently by Daewoo, prior to GM’s purchase of Daewoo, GM could not prove beyond reasonable doubt that it designed the car. As far as the court is concerned, GM did not patent the design of the Spark, was not involved in the development of the Spark and therefore concluded that Chery did not infringe any intellectual property rights of GM.
The media spun the story to make it look like Chery was genuinely guilty of theft, when the timelines of Chery acquiring the design from Daewoo and GM acquiring Daewoo clearly showed otherwise. The story of an upstart Chinese car maker copying designs of a leading American car maker fits into people’s worldview, and people find it easy to believe that story. So again, it’s a typical case of don’t believe everything you read.
The argument that the Chinese government is protecting Chery holds little water either, because anyone who understands the Chinese car market well knows that Chery is a private run company and has had a very difficult gestation period. The political power centers in Beijing were not too happy seeing Chery entering the car manufacturing business. In fact, they could’ve taken this opportunity to shut Chery down.
Remember that China is a centrally planned economy. Car manufacturers need a license to operate and traditionally it is the local provincial governments who form tie-ups with foreign manufacturers. For example, BAIC is owned by the city of Beijing, SAIC by Shanghai, FAW by Changchun. Chinese joint ventures are always named after their home city followed by the foreign partner and never the other way around. Shanghai-GM, Shanghai-VW, FAW-VW, Beijing Benz, Changan-Ford for example. This concept of doing business can be difficult for a typical westerner to understand.
Imagine that Toyota is not owned by shareholders, but by the district government of Aichi prefecture, becoming Aichi-Toyota. Apply the same analogy in an American context and you get Detroit-Ford. The local government is your regulator, your business partner AND your competitor, because the local government will often operate more than one joint venture. Shanghai for example runs both Shanghai-GM and Shanghai-VW. So you may have Detroit-Toyota besides Detroit-Ford. Also remember that the local governments also have their own domestic brands, which they eventually hope to develop into global brands.
Out of nowhere came this ambitious guy from some unpromising rural area, who wants a piece of the car making action. It is only after some very cunning moves by Chery’s founder Yin Tongyao that the Chinese central government had no choice but to allow Chery to continue making cars. And it was a decision made grudgingly. Yin’s Chery company was not part of the Chinese government’s original plan for its auto industry. Today, Chery is one of fastest rising domestic car brands, shaming its much bigger local government run domestic brands from SAIC, BAIC and FAW.
How did Yin managed to out manoeuvre powerful members of the Chinese Central Communist party to allow him to make cars is another story for another post.
And by the way, the similar sounding name between Chery and Chevy, that’s not deliberate. Chery is a play of words from ‘cheerful,’ as in ‘cheerful’ to ‘cheer’ to ‘chery.’ Anyway in China, the regular man on the street wouldn’t know what a Chevrolet is, so a deliberate copy will not make much sense considering Chery’s largest market in both the near and medium term is still China. What you and I know as a Chevy or Chevrolet is known to the regular Chinese man in China as 雪佛兰, or Xue fu lan in phonetic Chinese.
Note the larger Chinese text and format of the brand identity for Chevrolet in China.
Likewise, a Chery is known in China as 奇瑞, or qi rui. How to make sense of Chinese version of global brand names like Chevrolet in China is another story for another post.
Source URL: http://www.motorindustry.org/2011/12/15/chery-qq-vs-chevy-spark-copy-theft-the-true-story/