China & the auto industry

Alot has been said about China in the general forum, but I ran across an interesting stat in The Economist for last week. They had their annual review of the automobile business. Quoting:

“The boom in China is getting everyone excited, but it needs to be kept in perspective. For all the huge percentage increases, the annual value of that market is still equivalent to just about a month’s sales in the rest of the world”

In the end The Economist states, correctly in mho, that the auto industry is just too competitive to ever return to the mammoth growth that we’ve come to know and love.

You know the saying, Chinese people can’t drive.

you must also know the stereotype of germans as uptight racists?

Woo. already a hot forum. Spreading the hate.

Seriously, It is not so much about China and its people buying cars as much as it is about inexpensive labor helping to drive costs down. What are the quality standards going to be like and how will the American market respond. Also, will many of the european makers follow suit to stay competitve.

Many of the product categories have been flooded by cheap low quality knock offs. In the future as corporations move from factory to factory, they will abandon one factory for another. This will force factories to attempt survival through cheap knock offs. The same as we see in the various catgories in products.

Guest: You missed the most hateful ones…fortunately.

Interestingly, with regards to manufacturing, I read last night that Mercedes opened a new factory in Shanghai.

The thing about China though. With regards to current auto markets, you are correct, it’s about lowering production costs. But, a nation of over a billion people represents a great future car market. The Economist article I refered to was saying how many car execs were hoping to build a strong customer base now in order to cash in 10-20 years down the road. The problem is, all of the car makers had the same idea.

The end thought is, “Does China really matter as a growth market to the auto industry?”.

the thought of a billion more cars on the road is enough to make shivers run down my spine. i hope the chinese government is smart enought o have strict emissions standards.

… are you kidding me? have you been to their factories? There will be no strict emissions standards. The sad fact is the US standards are some of the highest in the world. Have fun coughing diesel in Paris, and unleaded in Guanjo.

you can drive a dirty two stoke engine till the cows come home in tianamen square, but downloading a movie file of tiananmen square incident can put you in jail. Its a different place.

you’re right…in fact, they sell leaded gas still in france. i was sort of incredulous when I saw it. Yes, their emission standards are lower, it’s just their fuel eefficiency which is better. and honestly, if their gas was as cheap as ours, they’d probably not care either… sadly.

yes, I know china’s factories pollute like mad, and that visiting there is sure to give you a cold immediately because of pollution. i had just heard somewhere that the chinese were actually aware that cars were going to make their air waaaaaay worse, and were actually going to do something about it…we’ll see if that pans out.

the economist is only a magazine. what it features as an article out of hundreds of similar articles which most of us have all read again and again does not constitute peanuts and should not create a standard in perspective for average readers. but unfortunately many uneducated readers take one sided arguements as the final verdict just as a jury that would listen to only one explanation and discard everything else. is that what they teach americans to believe in these days? i thought a fair trail should be conducted with both sides presenting their case.

i’m amazed at the bias specially from people who work for companies that have factories in china. it’s like saying “yes we have factories in china and we profit from it but it’s china’s fault if they want to run their own factories.”

what are thay a bunch of retards?

as for the auto industry being too competative to ever show growth, again they’re dead wrong. if that was the case these assholes who claim such nonsense should pack their bags and hit home in a sec instead of trying to force their way into china’s market.

chinese design is getting rev-ed up and it’ll be ready to meet the challenge sooner than anyone can imagine. maybe someone should pull out those articles written about horrible japanese cars and their cheap standards in the 70’s. where are those clowns now who claimed such ridiculous reports and future outcomes. the only difference here now is that US and europe want a share of china’s market and they nag for it because they think china is the second japan.

again they’re dead wrong because china is china, the most powerful country in asia with superior strength, wisdom, and of course patience.

“till the cows come home in tianamen square” wtf?!

“till the cows come home” : an American saying from the 50’s that means for a very long time, think “when pigs fly”


I think you misunderstood ufo. I have no doubt that China is going to be a huge market for all car makers, and that eventually their own domestic makes will make global inroads. I was refering to aggressive growth in terms of market share. For example, look at VW. They spent like drunkards for 20 years buying Skoda, Seat, Audi, Lambo, Bugatti, Bentley and probably a few others I just can’t remember at the moment. All of this and aggressive product development, heavy advertising etc won them 20% of the Euro market share.

Can VW or anyone else grow market share aggressively in today’s world? Realistically, only through mergers. The market is just too tight to allow anyone a real breakthrough product line that would make a difference. (Note, I said product line, not individual product)

The Economist was pointing out how many car execs think they will grow global market share by penetrating China. However: 1. China’s current car market is small by western standards and 2. Everyone is trying to sell in China, therefore, everyone will probably end up with the same share of the pie. Stalemate.

%20 of european market is a lot for a comapny like VW but nevertheless no western car company will be able to compete with chinese because as i explained in another thread chinese have a triple advantage:

1-modern post industrial revolution methodology and management
2-cheap labor approach combined with imported quality control
3-unique global business philosophy

this makes up %90 of their focus. the other %10 is composed of other things like design, marketing, sales etc. whereas in the west is actually reverse.

to change that west has to create an economic model that will defeat that of china’s which is practically impossible. ask any economist you want but they’ll probably tell you even if you rewrite the book on economic standards of the west you won’t be able to un-tie the gridlock of investment, corporations, wall street and banking system in the west specially that of US.

not to mention all other aspects of western lifestyle that have been mediated through private sector into government , other entities and back like schools, factories, non profit organizations, insurance, loan, social security, medicare, etc. things that come up virtually in every presidential election.

that’s why they mention things like increase in free trade which would leverage the loss on profit from other side by taxes and compiled products like for instance computers and such that virtually use all chinese hardware but sold as american products.

so as it seems companies like VW have to adapt to the market whether they’re selling in europe, US, or china. i don’t think that makes china an agressor ofsome sort if chinese companies are able to adapt better in the market. the point that economist doesn’t understand is that it thinks china doesn’t exist or at most in worse shape than west which is probably your view as well considering your last statement:

The Economist was pointing out how many car execs think they will grow global market share by penetrating China. However: 1. China’s current car market is small by western standards and 2. Everyone is trying to sell in China, therefore, everyone will probably end up with the same share of the pie. Stalemate.

I don’t read the Economist regularly, and the article I mentioned was an article only refering to the car market, which is a very particular sector of manufacturing. Most articles I have read in the Economist recognize those same advantages that you mention with regards to China.

thanks for clearing that out because voodoo economics concepts which helped things like auto industry have been over for a long time and bringing it back in different forms and shapes is something that the economist is hinting at when it recalls the auto industry 's glorious past having a “mamoth growth”.

i just explained how the panorama has changed and how people still look back to what is considered unattainable and compare it to the current situation which is totally different structurally and characteristically.

Actually, if the automakers play it right, they could actually turn a good margin in China. With the right axles greased, they could have a huge market with little or no regulation. Cars without airbags, pollution controls and safety cages would be much less costly. Throwing a little savings on the materials and work to looser tolerances and your production costs can be halved.


Frankly, the american market doesn’t have that great quality control. The days of Kia and Daewoo being the laughingstock of north americans are soon to be over, if they aren’t already…

I dunno about daewoo (wlthough a lot of their new models share a base with chevy’s stuff), but Kia’s going up.

And, in that vein, the reason american cars (not sure about european) are so much more expensive than, say, a Kia, is simply because the unions won’t allow the companies to built newer, more efficient, fully robotic factories. GM and the otehrs are still stuck with factories built in the 1920s - yes, upgraded since then, but it only goes so far.

So long as you make the CEOs drive the rest of their lives in a car without a safety cage or airbags, and make them breathe unadulterated leaded gasoline exhaust as they go out the door every day. Then I might be OK with what you’re proposing.

I know this may not be all that related to the topic, but here’s a story:

A woman drove her BMW 5 series through a busy market. She car was scratched by the bicycle of a vegetable vender of the village. The woman driver furiously got down the car and confronted the vege vender, saying that her yearly earning won’t even be able to pay for the paint job, and threatens to run her over with her BMW. So she got back into her car, reversed, and did what she promised. She got away because she was rich and had connections… or should I say she was rich because she had connections?

Anyways, I don’t know where I am going with this, but I’d rather own a bicycle in China.

for your info china ordered all gas stations in major cities like beijing who also host 2008 olympic games to remove the leaded gasoline pumps. they had 20 days from oct 1 to oct 21 (20 days) of this year to do so.

i flew to beijing on oct 21st and the air quality was good.

as for safty standards china is implementing iso standards for its factories who are producing new car models to be able to sell them in other markets. airbags included. so foreign automakers are going to be competing with chinese factories which are buckled by chinese government who provides their own manufacturing with a lot of financial and technological support. basically chinese factories get the better deal whether it’s work force, parts, high technology, equipment, or finance .

so the car companies like gm’s buick who already have a footing in the chinese market will probably be faced with a competition which is impossible to beat.

on another note - as far as i know airbags are still not required in US. in california there’re so many cars without airbags it’s gonna take billions of dollars to equip those cars with them. that’s why there’s still no law requiring it for cars already on the road.

ufo: agreed. Many people seem to think that auto standards are at 1920’s level everywhere outside of Europe and America. In Mexico, the auto emissions laws are only one generation behind the US (although their safety laws are much farther behind). In China about 2 years ago I think the government made their emissions laws about one generation behind the US/Europe. And as ufo suggests, when the Chinese goverment makes a decision, they are effective almost immediately, and no one complains…that’s the benefits of a dictatorship.

As for pollution, the biggest polluters are manufacturing, electrical generation, refineries and heating. A large proportion of Chinese heat with coal, the dirtiest fuel of all. I do not know off hand, but I suppose that regulations on the industries I list are either non-existant or not enforced. It’s the same with the US and Europe, if you really care about the environment, cars emissions should not be your first objective.

For those who want a look at China, Frontline has a great documentary online:

oh, thanks for clearing that out too.