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http://www.iht.com/articles/2006/10/17/business/cars.php

Chinese automakers not ready for U.S. market
By Keith Bradsher The New York Times

Published: October 17, 2006

NINGBO, China Every day in cities like this one, Chinese factories churn out waves of exports that flood markets in the United States and Europe: DVDs, microwave ovens, furniture, washing machines, shoes and more.

So it is no surprise that as China's industrial revolution advances, Western automakers and their workers have begun to seriously worry that an invasion of Chinese cars will begin soon.

But as it turns out, it probably will not be so soon after all.

Despite growing anxiety that the Chinese would quickly seek to conquer yet another important industry, it now looks as though it will be at least another several years before Chinese automakers start exporting significant numbers of cars they both design and make. They had intended to start selling their own brands in the United States as soon as 2007 but have pushed off their plans by a couple of years.

And now, some Chinese auto executives acknowledge, it could be as late as 2020 before they will be ready to take on a sizable chunk of the world auto market.

The reason? Despite China's manufacturing prowess, making autos that appeal to Western tastes is proving a lot harder than automakers here anticipated. While Chinese cars are reliable and inexpensive, Chinese automakers have not yet gotten their styling, safety, emissions and performance standards up to snuff, let alone their skill at marketing homegrown nameplates around the globe.

In one glaring example last year, a German automobile club tested one of 700 vehicles shipped to Europe by a tiny Chinese manufacturer of sport utility vehicles. It came up with a result that humiliated the Chinese officials who oversee the mostly state-owned Chinese car industry: the vehicle, the Landwind New Vision, got the worst crash rating the club had ever awarded in 20 years of testing.

"Most of the Chinese companies that were preparing for exports have turned cautious, because this is a very difficult job," said Lawrence Ang, the board member who oversees international finance at Geely Group, a large, publicly traded Chinese automaker.

China's automakers also face rising wages at the same time the country's currency is gradually appreciating, making Chinese exports more expensive abroad.

"It is a message for us," said Jiang Lei, the executive vice chairman of the China Association of Automobile Manufacturers, a government agency that guides the industry. "We cannot rely on cost alone. We have to improve our technology and management level."

Any delay is welcome news to Detroit's automakers, which already have been pushing thousands of workers into early retirement and closing plants as they continue to lose sales to foreign rivals, especially the Japanese. The extra time to prepare for the Chinese onslaught could help American automakers protect their turf.

That could help defuse tensions arising from the burgeoning American trade deficit with China, already running this year at an annual pace of $185 billion - and still rising.

For all the fears expressed at auto shows from Detroit to Paris in recent months, China's auto industry does not appear to have any magic formulas for making cars. Like other industries in China, this one is dominated by foreign-led joint ventures and subsidiaries of multinationals, which are first building cars for sale in the local market and plan to export later.

Western anxieties were provoked early this year at the Detroit auto show when Geely surprised auto executives by displaying a subcompact it designed by itself. Target dates for exporting, as early as next year, were buzzing around. Meanwhile, Chery Automobile, a rival of Geely, had announced that it, too, was planning to export a fully Chinese- made car next year to the United States.

Now, said Ang, the Geely board member, Geely will not start exports to the United States until "2009, 2010 or 2011." And Chery Automobile has twice pushed back its target date for exports to the United States, first from 2007 to 2008, and then again to 2009.

Other Chinese automakers are even more cautious. Shanghai Automotive Industry, First Auto Works and Dongfeng Motor Group - which are joint venture partners of multinational automakers but are taking steps to produce their own cars - have all taken go-slow approaches to exports in recent months. And they are refusing even to set targets for starting exports to advanced countries.

Chinese automakers certainly should not be written off. They still have strong advantages that will help them in the long run, among them skilled and diligent workers like Ai Biaohui, a strapping 22-year-old at the Geely factory here in east-central China, who labor for less than $250 a month.

Moreover, the government supports the industry by allocating to automakers the choicest land, near deep-water ports. The site for this Geely factory is just several hundred meters from the docks, for example. And here are other intangibles. Geely not only does not have to worry about unions - it even hires drill sergeants from the People's Liberation Army to improve discipline by teaching employees how to march in straight rows along factory roads.

Geely is also more efficient and better prepared than many Chinese automakers. In visits across the country to car factories run solely by Chinese companies, it is quickly apparent that most are not ready for global competition.

At a BYD factory in Xian, for example, a delivery mixup had left a large surplus of car engines stacked up along both sides of the assembly line on a recent afternoon.

Workers in blue jumpsuits tried to work between the heaps of plastic- wrapped engines. At the end of the assembly line sat a jumble of so many poorly assembled cars in need of repair that workers could barely maneuver successfully completed
cars off the end of the production line and out of the building.

Chery, located in Anhui Province in east-central China, has delayed exports partly to focus on improving safety. Malcolm Bricklin, who has a distribution agreement with Chery to sell their cars to dealers in the United States, said Chery had realized that regardless of price, American buyers expect cars to exceed minimum standards for safety and passenger comfort.

If Chery cars were subjected to crash tests now, he said, "they could pass regulations, but they would not be five-star crashes."

Still, some Chinese automakers have a slight head start through their joint ventures, which tie them to Japanese and South Korean manufacturers that have already gone through the long process of developing a sophisticated manufacturing backbone and figuring out the marketing networks needed to navigate through the United States and Europe.

From a joint venture in the southeastern city of Guangzhou, Honda now exports hatchbacks to Belgium. DaimlerChrysler is working out the final details for a joint venture with Chery Automobile to build Chrysler-designed Dodge subcompacts in east-central China for export to North America, using a combination of imported and locally made parts.

Nanjing Automobile has bought the MG name and much of the factory equipment from Britain. But three of the first four models that the company plans for the American market will be sedans carried over from British designs. Only one, a coupe, will be designed in China, said Duke Hale, the president and chief executive of the company's North American operations.

The exporter of Landwind sport utilities, which failed the German testing, will try again, said Peter Bijvelds, the chief executive of LWMC, the Dutch importer of the vehicles to Europe.

The New Vision had met all safety regulations, he said. But he conceded that the test had hurt. Now, LWMC plans to try importing a completely different model from China, the Landwind Fashion crossover utility vehicle, beginning next summer.

Japanese and Korean automakers cracked the American car market by climbing up a ladder of larger and costlier models. China, too, will start with low prices.

But the global market has become so integrated and competitive that China will have to move much faster than past companies in building manufacturing capability and technology. In the case of Japan, their automakers had time to experiment with inexpensive subcompacts, like the early Honda Civic, before moving to reliable midsize cars and onto technologically advanced luxury models like the new Lexus GS 450h, a gasoline-electric hybrid sedan.

Yet the bottom rungs of that ladder have largely disappeared since.

The reliability of used cars has increased and financing and warranties have become widely available. This has pushed many economy cars out of the market.


Even South Korea's Hyundai has moved up to larger and costlier cars. After entering the American market in 1985, it quickly developed a reputation for low quality, which took more than a decade to overcome. Chinese automakers may be on the same timetable.

The toughest part of building a car comes in making thousands of little trade-offs: designing one part a little thicker or stronger and a neighboring part a little thinner or lighter.
 

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Discussion Starter · #2 ·
Moreover, much of the current cost advantage enjoyed by Chinese automakers because of their cheap labor will inevitably melt away as they buy better catalytic converters and other technology to meet American safety and emissions standards, said Mike Jackson, the chairman and chief executive of AutoNation, the biggest car dealership chain in the United States.

And China's many state-owned automakers and their auto parts suppliers appear to be stumbling as they try to modernize, partly because they are so heavily subsidized by the government and overinvest in equipment, not using enough low-cost labor .

At the Fast Gear truck transmission factory in Xian, robots with flashing lights transport transmissions as workers add parts to them. Though a conveyor belt would work just as well - as would cheap unskilled workers pushing trolleys - the factory's management takes pride in the spanking new robots.

"In this factory," boasts Qian Qunzhu, a deputy director of the factory, " you can hardly find any workers."
Well Well Well
 

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Wow, I'm even more certain that Chinese cars will thrive in the world markets after reading this article.

Imagine if none of these issues were identified and brought to light?

Now all the Chinese car companies have to do is fix these problems, and then they will be ready.

I'm more optimistic than ever.
 

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I don't understand the comment about MG. :confused:

What is wrong with three of the models being sedans - is that not what US citizens want?

And as for 2020, the last we heard from MG's Duke T was:

"Brits Are Coming: MG Boss Wants 300 U.S. Dealers - MG Motors expects to appoint 300 U.S. dealers in preparation for a mid-2008 relaunch of the brand in North America, according to the top American executive"

Ahh - maybe the first, and last but one words of that piece gives a clue - they fail to realise that some Chinese companies are becoming global companies...
 

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Real_I_Hate_China said:
........The New Vision had met all safety regulations, he said. But he conceded that the test had hurt. Now, LWMC plans to try importing a completely different model from China, the Landwind Fashion crossover utility vehicle, beginning next summer........

Well Well Well
The IHT article, and the following, disappointed me when I saw it, but if it's all true we can chalk it up to the learning curve....or just another few hurdles that will be scaled with a resolve that has a history of more than 5,000 years.

"…. the Fashion (fengshang) compact van from the Landwind brand is qualitatively the worst car by a long shot that I have ever encountered at an auto show: squeaking doors, badly fitted carpets, the fit and finish of a wreck………" says Guido Reinking editor of Automobilwoche after attending the Paris show
 

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F OFF with ur LARGE TEXT !

F**K OFF
 

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well that's how grown up ppl deal with this crap , If this arse doesn't shut up, I am outta this place for good .
 

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I read the full version of this article in New York Times this morning.
It's quite amusing - it sounds like a spoiled child being happy about
a deferred punishment.

The author, Keith Bradsher, made a big deal of some worker using a
hammer and chisel at the assembly line. I guess he thinks all things
in life are done via a computer.

Also it's funny how Geely, according to the article, hires PLA officers
to improve discipline. I immediately had this scene from Forest Gump
in mind:

- Private Biaohui-Gump, why the hell did you assemble your vehicle
so quickly?!
- Because you told me so, drill sergeant, sir.
- God damn, it's a company record. Disassemble it.

Overall, it's a very positive article, if you know what to look for.
 
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