The Chinese Are Coming, Part XIII -- With Cars, But Not Until 2008

Thanks for the article link. The article raises some interesting points but also reflect a somewhat arcane view of China.

[Quote: �But some observers are more reserved, suggesting that Chinese mastery of making low-cost garments and consumer electronics doesn't mean the Chinese are ready to compete in an industry as complex as designing, marketing and selling automobiles.� �A June article in Automotive News points out that most Chinese car companies are new, with little depth in their engineering or design staffs, despite support from the Chinese government.�]

It is a common misconception that China does not have its own industry, and can only produce low-cost garments and consumer electronics. In fact, China has it own heavy industry, from cars, trains, to planes, and space equipment. It is a self-sufficient country, although the living standard may be low compared to the West.

The First Automobile Works (FAW) Group in China started making cars more than 50 years ago. A lot of the Chinese companies made profits in the domestic markets, as well as in the Eastern European and African markets. Haier made huge profits in making fridges, washer-dryer, microwaves, etc and was attempting to take over Maytag, albeit unsuccessful due to US resistance. Lenovo made its money selling computers to the Chinese domestic market and was ambitious and deep-pocket enough to buy IBM's personal PC section.

As to whether Chinese cars can penetrate the US market, it will be a tough road, although China seems to be manufacturing car parts for US, apparently the Chevy Equinox uses �made in China� engines.

On the other hand, why US car makers were not able to crack into the Chinese market remains a lesson to be learned. In China, people drive domestic cars, also, German cars. Traditionally, Chinese consumers have a distain for Japanese products due to the recent memories of what the Japanese did to China during WWII, it would have been a golden opportunity for the US car makers, but they somehow failed miserably on that front and let the Germans and Europeans took the lead. You could see old models of VW Jetta running around Chinese cities everywhere. VW must have made a killing in the 90s. Audi is a well-recognized brand luxurious brand (much more prevalent than in the US). I would be curious to read how the Germans got ahead in this field.

That said, one US consumer products company that has been doing extremely well in China is P&G. Perhaps the US automakers could learn how P&G did it.

Katie

Dan,

I would agree with you, but you mean Buick, not Oldsmobile, right?

I'd have to disagree with Katie on US auto companies failing in the China market. GM (via primarily Buick) is the fastest growing foreign car brand in China. In fact, China is one of the remaining profitable regions for GM.

You're right, generally people don't like Japanese products, but, cars are different. The educated people with money like foreign cars - if not as a status symbol. Japanese have a good reputation of producing quality cars (whether its made in Japan or in China). You do see quite a few Nissan and Toyotas on the road. But, you also see more Korean cars than Japanese.

On the luxury front, it seems BMW is gaining in favor as EVERYONE and their brother has a black Audi A6 or similar. GM and their Cadillac needs to do more to gain that market share.

As for Chinese cars in the U.S., I think they need to improve quality standards, improve size a bit (not all Americans are small Chinese people). But I do see the Xiali (given an easier name to say by the average American) will sell well to cost concious young Americans.

Maybe I was not being clear, but I don�t think I said anything to the effect that no U.S. car manufacturer has succeeded in China, I am just sayin that the US auto makers could have done much better in China. I know Buick is doing well, but there are so many other US brands could have done well in the Chinese market. Yes, BMW is definitely the benchmark for the Chinese riches.

Oldmobiles? I was, for a second, shocked � I hardly see those even here in Canada (when I went to school in the US I knew many people who drove Olds).

Leaving all the economic analyses aside, my personal view on why China will have a hard time cracking into the US market is because the Americans have a true passion for their own cars, but maybe the times are changin.

P.S.I have an odd fascination with big and roomy US cars, and as such drive a big and roomy GM car.