Auto Makers from China

Exports of Chinese cars doubled last year to nearly 350,000.  While this is hardly a drop in the bucket of global auto sales it is an indicator of just how serious China is in the car industry.

Last month DaimlerChrysler struck a deal with Chery Automotive to sell their cars in the US.  this could happen as soon as 2009.   Changfeng who partnered with Mitsubishi about ten years ago is showing examples of their export model SUV. 

Chinese engineers that have gained experience in the American automotive industry have left their jobs at Ford and GM and are going back to China to develop new cars and power plants that will enter the world market before this decade is out.

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9 Responses to Auto Makers from China

  1. Is there any alternativve?

  2. Noel says:

    The last thing we need in this country is more stuff coming in from China. This is NOT an automotive issue, but a trade and outsourcing issue. This is only the tip of the iceberg. Give it ten years and we’ll see nameplates from all of the Big 2.5 being made in China because it’s how GM & Ford especially will be able to survive.

    While I feel the U.S. auto industry is getting all it deserves for several decades of inept, arrogant management, half baked design, and an inability to deal with the UAW, bringing in cars made in China, even under the guise of a “relationship” with any of the big 2.5 is not a solution. It will hurt US millions of blue and white collar workers, the economy, the trade balance and more.

    And I’m hardly a protectionist or some flag-waving “Buy American” guy. I have owned only one American car in my life and will continue to fill my driveway with cars from Europe.

    I encourage anyone reading here to also read Lou Dobbs book, “War on The Middle Class” to learn just how much of America we have lost with these deals with China.

  3. jimsgarage says:

    GM announced today that it sold more cars outside o f the uS than it did within the US. This is the second year in a row. It still holds the number one spot in terms of global automobile production, but Toyotat is not far behind and is predicted to gain that top spot this year.

    China is just another competitor in the mix. That is what capitalism is all about. In theory it is a Darwinian outlook of the survival of the fittest in the market place.

  4. Noel says:

    Maybe GM should be wondering why it is selling more cars outside its home market. But thaty would require it to remove its head from the sand.

    And I differ that China is just another competitor. They are not playing by the same rules as every other player. Not that changing the rules is bad, but it means adapting to those new rules.

    But why is it, do you think, that it is almost impossible to import US cars to China?

  5. Jim says:

    I think China is playing by the rules as China understands them. It has studied capitalism very closely and as it has exercised it within China it has done pretty well. Every country plays by its own rules. Germany’s VW has for years had 28 hour work week for their line workers. They are now grumbling about having that moved to 32 hours. What do you think that does to the cost of VW’s?

    China not importing US cars? US cars are some of the best selling makes of cars in China. Buick holds some mystique with the Chinese and is as preferred over there as a Lexus or Acura would be over here. GM has redesigned their cars for the China market with more room in the back seat area because the Chinese are more apt to be driven than drive their own cars.

    I am probably starting to sound like my citizenship should be challenged, but really I’m just trying to make folks aware of the changes that are inevitably occurring.

    A lot of what and why things are the way they are is because we wanted them that way. We wanted Wal-Mart where we could get goods at incredibly cheap prices. Now 8 cents of every retail dollar is spent in Wal-Mart. We wanted food fast and cheap and now we have franchises on every corner selling transfat at bargain prices. We wanted communism to fade as a threat to our democracy and now we balk when these countries adopt capitalism with a vengeance.

    Nothing changes like change. There will come a time in the not too distant future that China will no longer be the manufacturing Mecca that it is today

  6. Mark says:

    Jim, Noel,

    Great discussion. Jim, your last paragraph on perceived (or real) threats to our way of life first from Communism, and now the Capitalism that is replacing it is really spot on, and something that I never thought of in those terms.

    The US foreign policy seems almost perpetually (at least in my lifetime) toward installing ‘free’ democratic governments with elections etc. Blindly, we expect these countries to adopt capitalism, but perhaps we didn’t consider what happens when they get on the curve behind us. Being selfish for a minute, if China, India, Mexico, Brazil, Chech republic, Slovakia, Africa, were only to fill the manufacturing niche, then we could argue that our buying power would only increase. However, it’s not the case. This is only the foothold, and with education, the second and subsequent waves of growth will allow these countries to compete for skilled jobs globally. We are already seeing that in many of these places.

    I think Jim is right, that after some period of time, the global economy will settle out and there will be less of a gap in pay here vs elsewhere for a given type of job. As more money and development moves into these countries, they will follow in our footsteps, with real estate, infrastructure and transportation growth.

    Jim’s already blogged on these from the China perspective. Eventually, the people there will want more as they will have more places to spend it. The cost of living will rise, as will the wages and the gap will close. However, this will take a long time I think, (relative to my life perspective) and in the meantime, I think the US may be heading toward a services based economy, and there may be some unsettling times ahead.

    It’s change, and people, myself included, fear it when they don’t fully understand it, nor how to navigate it to their benefit Personally, I see all the building growth around our neck of the woods negatively – it is a drain on my available time in life (spent commuting) and the ever increasing taxes, fees, and proposed tolls all reduce what I’m working hard to build. But this thinking means that I’m only looking at it one way, not from the other side.

    How could I benefit from the growth? All these people coming here represent opportunity? I see it as a threat, but how can I turn it around so that they all pay me? I said I was taking a selfish tact, but if we are all honest, and peel it all back, it is a bit Darwinian, and we all want to come out on top more or less.

  7. Noel says:

    One of the problems I have with China is their general disrespect for ownership of intellectual property. They seem to feel it is totally OK to steal someone else’s designs, ideas, products or technology and market it as their own. This may be changing, but I’m not holding my breath for real improvements in that area.

    I agree that the demand for cheap goods has been a huge part of making China the economic force it is today. And they have remade capitalism into a model that works well with their political system. Unfortunately it is not ultimately in America’s best interest to be so economically bound to China as it is. Nothing wrong with trade, but there has to be a balance.

    But yes, there will come a time–my guess is starting in about 10 years–where China will not be the manufacturing Mecca it is today. As their standard of living goes up the costs will rise. Then we have to look to Africa, which is why China is already moving to build political alliances in some African nations. And what few people think about is Latin America, where labor can also be had relatively cheaply. And since many lean toward socialism or communism, there is a good fit with China.

  8. jimsgarage says:

    I think China’s attitude on intellectual property is rapidly changing. Why? Because they are developing their own and suddenly the idea of protecting IP makes sense when it is to your advantage. For decades I have seen my contemporaries find ways to crack software protection schemes and feel they were justified in getting a “free” copy of Photoshop or Windows because they just could not afford to pay retail for it. Besides, it was exciting to discover a secret way to defeat the challenge of encrypted product keys.

    Of course there is no such thing as a “free lunch” and whether it be increased taxation or software piracy the cost is passed on to the consumer.

    There is also no “free lunch” when you are looking for a Wal-Mart world where your costs are low and goods are highly available. Sure labor costs are lower in China and other parts of Asia (India, too), but there are other things that have lead to the movement of manufacturing over there. One is the hidden tax on all US businesses of OSHA and EPA (and Sarbox, etc.). You don’t find those kinds of burdens on the Asian suppliers – yet. The current generation is more than willing to make the sacrifices so that their descendants can benefit. This generation of sacrifice will not be so inclined to see their offspring live through that kind of risk. The other aspect of the environment in Asia is that there is a willingness to invest in the very latest technology, something that the US companies are reluctant to do. First of all they don’t have any tax incentive and secondly the executive compensation model discourages such behavior. The US has fallen into a trap of measuring CEO performance in three month increments, stifling any strategic thought. The stock option debacle has eaten away at what used to be the core business drivers and corrupted the behavior to focus on stock value – so what CEO in their right mind would spend on capital equipment and risk their fortune in stock options?

    After Russia and Eastern Europe have their day in the sun as manufacturing central the focus will indeed move toward Africa. Conditional on their ability to achieve political stability, they are ripe for it.

    Great exchange of thoughts here Noel. Thanks.

  9. jimsgarage says:

    An update on American car sales in China from the Wall Street Journal reports that both Ford and GM sales in China have done very well in 2006. Ford sales surged 87% to 166,722 units and GM rose 32% to 876,747 units. GM expects continued double-digit market growth. Further – GM plans to invest $1 billion a year through 2010 in the China domestic operations.

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