Chinese lineup unconvincing
Dennis DesRosiers, the Canadian auto industry's numbers guru, is one of the few analysts who isn't convinced that North America is about to be submerged by Chinese-built cars and trucks.
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Dennis DesRosiers, the Canadian auto industry’s numbers guru, is one of the few analysts who isn’t convinced that North America is about to be submerged by Chinese-built cars and trucks.
“They have cheap steel and cheap labour,” said DesRosiers at this week’s North American International Auto Show. “But do they have the infrastructure?”
DesRosiers could also have drawn a parallel to Mexico, which everyone thought a few years ago was going to decimate the North American manufacturing base.
Most car firms have a presence there, but ongoing social unrest in parts of that country must surely give prospective industrial immigrants pause.
Even some Chinese industry experts have concerns about their country’s medium-term future. Wayne Xing, publisher of China Automotive Review, a trade paper, notes in the current issue that the country’s domestic market is now the third largest in the world and is expected to overtake Japan for second place some time during 2007. Its production capacity is also expected to surpass Germany soon for second place. (The U.S. is first on both counts.)
But, adds Xing, does that make it a “strong” industry â€“ one that develops its own technology, has local research and development, and is more than just a low-cost parts maker and assembler?
To date, most of the cars made in China have been sold domestically, or in unsophisticated markets such as Iran and other developing nations.
When they’ve aimed higher, they have so far fallen short.
The Brilliance China Automotive Holdings company recently shipped the first 3,000 of what is hoped will be 158,000 Zhonghua sedans to Germany over the next five years.
With styling by the Italdesign Giugiaro house, chassis consulting by Porsche and production expertise by BMW, the Zhonghua is pretty hot stuff in China. The deal was hailed by the Chinese media as a milestone for the industry.
But the car failed a European side-impact crash test, and only scored two stars out of a possible five in a frontal crash test.
Retrofitting the cars to meet these standards is obviously cost-prohibitive, and if the best the Chinese industry can offer can’t meet current standards, how is it going to cope with ever-tightening regulations on pedestrian impact, environment-friendly materials and end-of-life recycling?
If the Geely Automobile Co. subcompact that almost made it to the Detroit show last year (it was parked out in the hallway) and the Liebao SUV and Feibao pickup, from Changfeng Motors, that actually made it inside the tent this year are any indication, Chinese assembly quality is nowhere near ready for North American prime time.
Eric Descarries, a Montreal-based car writer, told me after careful examination that anyone washing their brand-new Liebao better be careful or they’ll tear their hands to shreds on the rough edges of the sheet metal body parts.
The Hyundai Pony and the original Fiat-based Lada were never as bad as these, and the Chinese have had 20 more years to figure it out.
There surely is a market for a sub-$10,000-grand car in North America, certainly in Canada.
But even if these things get a 10-year warranty (which would be financial suicide if the quality of the pistons is no better than that of the upholstery or plastic trim), I can’t imagine too many North Americans thinking any of them would be a better alternative than, say, a four-year old Civic or Corolla.
Chery Automobile Co. announced a couple of years ago that it had jumped into bed with Malcolm Bricklin to bring cars into the U.S. Chery recently jumped back out of bed and is working toward a deal with DaimlerChrysler.
The broad question is: Has there ever been a manufactured consumer product from a communist nation that has succeeded on the international market? (I might grant you Cuban cigars and Russian vodka.)
If the capitalist theory is correct, China will have to open up its industrial system, financial system, maybe its entire society, if it wants to achieve an international standard of success.
Some observers â€“ including this one â€“ feel that India actually is better positioned to be a threat to Western auto makers. Not only are its social, economic and political systems more open, but India already has a well-educated, large and growing middle class, which seems to be a requirement for a successful economy.
On the other hand, Sammy Chan, a Toronto-based Chinese-language automotive writer with roots in Hong Kong, told me he believes that the Chinese takeover of Hong Kong has worked out well, that business there continues to thrive and prosper even under communist rule.
Maybe this will be a case where industry leads politics, instead of the other way around.
After all, who would have guessed in 1957 that the Japanese car industry would be where it is today?