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Domestic Chinese brands sell even cheaper models - subcompacts at $6,000, midsize cars for $15,000 - which are still too costly for the large majority of the 1.3 billion Chinese but are affordable for the rapidly growing middle class.
Some of the best examples of Chinese cost efficiencies can be found at Geely, the only large, purely Chinese automaker that is not partly owned by a government agency and has not gotten its start with the benefit of lavish loans from state-owned banks.
"We do not belong to any government," said Li Shufu, the company's chairman and controlling shareholder. "This may not be bad. We had to fight on our own, and we became the most competitive in China."
Geely, with 5 percent of the market, is the country's second-largest home- grown automaker, trailing Chery, a state-owned company with 7 percent.
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Viewpoints: Remembering Milton FriedmanVolkswagen brands hold the largest share of the market, at 16 percent, followed by General Motors, with 11 percent, also through a joint venture.
Geely's cost advantage over multinationals starts with developing new vehicles. Freshly hired from universities, the company's engineers earn $4,600 to $7,600 a year, with few costly benefits.
Even if Geely sets up an overseas factory someday to be closer to customers, "the research and development will still be done here and costs less," said Yu Xueliang, Geely's vice president for domestic manufacturing.
The next advantage lies in labor costs - not just at the assembly plant but at nearby parts factories as well.
For starters, most of the workers are in their early 20s, young enough to be the children of the typical Big Three worker in the United States, and with low medical costs to match.
Wages are low, but so are living costs here in the company's home, a port in southeastern China, where the Geely factory sits near the base of a steep- sided hill topped by several temples.
Zhang Jia Hong, 22, earns $250 a month as a quality control inspector and repairman at the end of the assembly line here. But his one-room apartment in town costs $20 a month, a common price for a Spartan home in a Chinese city far from costlier metropolises like Shanghai or Beijing.
He eats two large meals a day at the factory canteen for $40 to $55 a month. The company gave him a free Motorola phone with a built-in color camera and charges him $2.50 a month for basic service.
"I've loved cars since I was very young," he said. "There was a car factory near where I grew up and I played there as a boy."
Geely has also adopted Japanese and Western techniques for controlling inventory costs. Auto parts are delivered regularly in small, plastic bins and few backlogs were visible during recent visits to the company's factories in Taizhou and Ningbo, a three-hour drive to the north.
By contrast, huge loans from state- owned banks have left many state- owned automakers with less incentive to be efficient. Periodic shortages and price increases for steel and other raw materials give automakers reason to hoard parts. But the result is that large inventories of spare parts are common in many state-owned Chinese auto factories elsewhere. The extra parts not only take up costly floor space but also hurt quality - when a problem is discovered in a part, it may take a long time before improved parts are ordered as replacements.
Despite being firmly in the private sector, Geely goes to considerable lengths to stay on good terms with the Chinese Communist Party.
The most productive workers are invited to join the party, including Zhang, and have a red flag with a yellow hammer and sickle flying above their work stations on the assembly line here.
Trade barriers among provinces within China have hobbled Geely's efficiency and cost controls to some extent, however.
Li, the entrepreneurial son of a Taizhou farmer, said that a few years ago, when a taxi company in Tianjin bought Geely cars instead of Xiali cars produced in that city, local officials were so angry that they ordered an investigation into who had approved the purchase and barred taxi companies in the city from buying any more Geelys.
Domestic Chinese brands sell even cheaper models - subcompacts at $6,000, midsize cars for $15,000 - which are still too costly for the large majority of the 1.3 billion Chinese but are affordable for the rapidly growing middle class.
Some of the best examples of Chinese cost efficiencies can be found at Geely, the only large, purely Chinese automaker that is not partly owned by a government agency and has not gotten its start with the benefit of lavish loans from state-owned banks.
"We do not belong to any government," said Li Shufu, the company's chairman and controlling shareholder. "This may not be bad. We had to fight on our own, and we became the most competitive in China."
Geely, with 5 percent of the market, is the country's second-largest home- grown automaker, trailing Chery, a state-owned company with 7 percent.
Today in Business
China's carmakers muscle competitors
Private equity firms attracted to traditional media companies
Viewpoints: Remembering Milton FriedmanVolkswagen brands hold the largest share of the market, at 16 percent, followed by General Motors, with 11 percent, also through a joint venture.
Geely's cost advantage over multinationals starts with developing new vehicles. Freshly hired from universities, the company's engineers earn $4,600 to $7,600 a year, with few costly benefits.
Even if Geely sets up an overseas factory someday to be closer to customers, "the research and development will still be done here and costs less," said Yu Xueliang, Geely's vice president for domestic manufacturing.
The next advantage lies in labor costs - not just at the assembly plant but at nearby parts factories as well.
For starters, most of the workers are in their early 20s, young enough to be the children of the typical Big Three worker in the United States, and with low medical costs to match.
Wages are low, but so are living costs here in the company's home, a port in southeastern China, where the Geely factory sits near the base of a steep- sided hill topped by several temples.
Zhang Jia Hong, 22, earns $250 a month as a quality control inspector and repairman at the end of the assembly line here. But his one-room apartment in town costs $20 a month, a common price for a Spartan home in a Chinese city far from costlier metropolises like Shanghai or Beijing.
He eats two large meals a day at the factory canteen for $40 to $55 a month. The company gave him a free Motorola phone with a built-in color camera and charges him $2.50 a month for basic service.
"I've loved cars since I was very young," he said. "There was a car factory near where I grew up and I played there as a boy."
Geely has also adopted Japanese and Western techniques for controlling inventory costs. Auto parts are delivered regularly in small, plastic bins and few backlogs were visible during recent visits to the company's factories in Taizhou and Ningbo, a three-hour drive to the north.
By contrast, huge loans from state- owned banks have left many state- owned automakers with less incentive to be efficient. Periodic shortages and price increases for steel and other raw materials give automakers reason to hoard parts. But the result is that large inventories of spare parts are common in many state-owned Chinese auto factories elsewhere. The extra parts not only take up costly floor space but also hurt quality - when a problem is discovered in a part, it may take a long time before improved parts are ordered as replacements.
Despite being firmly in the private sector, Geely goes to considerable lengths to stay on good terms with the Chinese Communist Party.
The most productive workers are invited to join the party, including Zhang, and have a red flag with a yellow hammer and sickle flying above their work stations on the assembly line here.
Trade barriers among provinces within China have hobbled Geely's efficiency and cost controls to some extent, however.
Li, the entrepreneurial son of a Taizhou farmer, said that a few years ago, when a taxi company in Tianjin bought Geely cars instead of Xiali cars produced in that city, local officials were so angry that they ordered an investigation into who had approved the purchase and barred taxi companies in the city from buying any more Geelys.
