>>>>I would hardly call them competitive. Indigenous Chinese automotive expertise is pitiful - quality is poor and they are dreadfully inefficient - factories full of barely literate individuals.>>>>>
That may well be the current status quo, but Chery are sourcing their expertise from Europe, e.g Lotus have been called in to sort the suspension systems, Pininfarina have been asked to pen some of their coupe-cabrio designs, AVL from Austria to develop four new engines and a UK consultancy Ricardo is said to be developing a hybrid electric drivetrain system.
IMHO to dismiss the Chinese as trivial players in the future development of the auto industry is to grossly underestimate their intentions.!!!!!!
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Met a Malaysian bloke few months ago, boyfriend of a relation by marriage, doing a graduate course in automobile electronics somewhere like Swindon. Because he was quite bright-eyed and bushy tailed we got talking about his subject, I remarking that were I any kind of automobile engineer I would make a beeline for China where there might soon be great opportunities for radical innovation. He did seem to see what I meant and even to agree, nodding vigorously with a smile.
Never mind fusty and out of date now. Many have pointed out that Japan was a bit like that not long ago.
The thing China has more of than any other country is scale, just numbers. It has to count for something if only a very very big low-priced market.
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Chinese GDP per head is approximately 1% of UK's. Is this the level to which we have to lower ourselves to be competitive?
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matey, imo, that statement is either designed to be misleading or misuse of statistics/averages.
the chinese elite is something different. (just look the success of ethnic chinese anywhere in the world where they are free to use thier skills). the chinese dragon has been unleashed from the shackles of maosim, and is going to surprise a lot of blinkered stuck in the muds.
IMHO to dismiss the Chinese as trivial players in the future development of the auto industry is to grossly underestimate their intentions.!!!!!!
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dude: well said, you are dead right. there was a time when m&s would not buy anything other than british, shoes from italy were considered the best, etc.
now even the indian cotton mills are closing down as they cannot compete with the chinese on price and quality. the eu has had to slap import duties to protect the dwindling italian shoe industry.
you only need to look at any new electronic/electriacl product today to see that the majority are built in china. even the mighty ibm had to sell out to lenovo of china.
finally, note that china took the mantle from britain in 2005 of world's 4th largest economy. see:
news.independent.co.uk/business/news/article333068...e
China powerhouse overtakes UK as world's fourth biggest economy
By Philip Thornton, Economics Correspondent in Hong Kong
Published: 14 December 2005
China has overtaken the UK as the world's fourth largest economy, it emerged yesterday in what will be seen as a key economic landmark for the new century.
but i guess that will not impress any of the self righteous ones.
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Certainly not dismissing the Chinese. They will learn very quickly.
Chinese GDP per head IS about 1% of UK's (not difficult to understand - take the GDP and divide by the number of people in the country). 90%+ of the population are at subsistance level. The 'elite' are a fraction of a fraction of 1% of the population. 50% of the country suffers routine power cuts (and there are still many rural areas that have no electricity).
How many of the people posting above have been to China and visited automotive factories - talked to their managers (via translator of course!)? I'm by no means dismissing them, but they do have problems - there is more to success than just cheap labour. A massive number of Western companies are active in China, but much of the design work is done in the West and profits are mostly repatriated.
I suspect there could be many political problems ahead too. South Korea and Japan are cited as 'role models', but they are democracies and Japan, in particular, had the big 'zaibatsu' before the war which morphed into the 'keiretsu' after the war. The Americans also had stong political, military and economic ties with Korea and Japan whereas I suspect there is much more antagonism toward China. The Americans have already blocked some Chinese takeover deals - employing the usual US 'rules' - i.e. globalisation is great so long as it is to US benefit.
Certainly no dismissing the Chinese - but its not as simple as lots of cheap labour so lets build lots of cheap cars.
IMHO people are overlooking India.......
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& this what we can all buy...
www.austin-rover.co.uk/fawlubaof.htm
Same link as yesterday, in long running production vehicles.
VB
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I feel quite sick, it looks worse than the hideous original over 20 years ago.
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There is a slight difference between the japanese and Chinese experience.
In the 70's, when the Japanese were just starting to make inroads into the UK, the market was slightly different. Many mornings I would be press-ganged into bumpstarting someone's car. On motorway trips there would be literally dozens of cars on the hard shoulder sometimes. My father's car had no radio, no heated rear windscreen, a three speed gearbox, etc.
The Japanese were offering reliability and standard gizmos. (In 1981 I was in a teacher's car and was astounded to find it had five gears - and that the teacher's legs were quite dishy when revealed getting into her car).
Now, all the players have raised their game; there's no longer a huge quality/value for money gap to be closed. Obviously there will always be a gap at the bottom of the market, but the other big holes are gone.
I suspect the Chinese will make it into the market and end up doing a good job of it, but I don't think the market is ripe for domination in the manner everyone seems to be fearing.
V
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I agree Vin, there is clearly a comparison between the Japanese approch in the 60's and 70's and the Chinese approach now. However where as the Japanese took western technology (i.e. hifi, consumer electronics) or concepts (i.e. motorcycles) and made them more reliable and slightly cheaper the Chinese are not adopting the same philosphy, yes in some areas they are virtually leading the market in quality terms (i.e. flat screen monitors) though in other areas they are making second rate products (i.e. cloned Honda motorcycles) and hoping that low price will ofset poor quality enough to lead to sales success.
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I suspect that were the Chinese will be sucessful in the short-medium term is in acting as a manufacturing base for other people's products - e.g. the success that Honda are having by building Yaris in China, and of course the motorcycles. The still have a lot to learn about car design (the suckers actually WANTED the K-series engine IPR, for example!).
One thing you have to bear in mind though is that many products these days are not labour-intensive. Whereas 30 years ago a car factory might have needed 25000 production workers, a modern plant gets by with 2500 for the same output. This is due to much higher levels of automation. The percentage of cost of a new car which is down to the labour is really very small - not more than 10% for a £10k car. Proportionately it is more in a small car - so the Chinese are likely to have a cost advantage in small car production. In a mid-large car the cost advantage would be relatively minor. When one considers the costs of shipping, excahnge rate fluctuation etc it starts to get marginal. To some extent we see this with Korean and Malaysian vehicles which are actually not that much cheaper then European products, even though they got much of their technology at 'knock down' prices from GM and Mitsubishi and therefore have minimal development costs to recover.
If it was all down to labour costs we'd already all be driving Kia's, Daewoos and Protons.
One last thing - do not forget that the Chinese currency is a 'managed currency'. It was fixed to the dollar until 21st July last year - then they revalued it up by about 2% and fixed it to a 'range' of Western currencies. Currently it is reckoned to be undervalued by around 20-25% (this is what is upsetting the Americans so much). Allowing to currency to float, or revaluing it by 20-25% would, at a stroke, destroy most of their competitive cost advantage and cause terrific financial and political instability....
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One other factor that has not been mentioned in this thread is the cost of land and the ease of development. To build a car factory in the UK or Europe is expensive and time consuming, whereas in China it would be railroaded through. This will mean they can bring new factories on line faster than we can, besides having lower labour costs. A new factory should also be better laid out and equipped than an existing factory.
I believe the initial reaction to Chinese cars will be they will be fairly poorly received with very small sales. But given a few years the sales will become stronger and they will learn to improve their cars to meet our standards. In the long term I can see much of our car manufacturing industry leaving our shores, the same way ship building has done.
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Roger
I read frequently, but only post when I have something useful to say.
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One other factor that has not been mentioned in this thread is the cost of land and the ease of development. To build a car factory in the UK or Europe is expensive and time consuming, whereas in China it would be railroaded through. This will mean they can bring new factories on line faster than we can, besides having lower labour costs. A new factory should also be better laid out and equipped than an existing factory.
No, that's not the case. To build a factory 'officially' in China (i.e. with all the proper permits etc) is a very protracted process since it involves getting 'licences' from city, regional and national government. To achieve this the appropriate officials must be invited to sit on the company board etc etc - basically its ingrained corruption. If anyone is upset along the way then there will be further delays until the 'slight' is addressed in some way.
Foreign companies must have a Chinese partner of some sort - often the 'partner' just allows their name to be used in return for a cut of the profits - they might not actually contribute anything to the enterprise.
One of the things that foreign companies find very irksome about operating in China is that contracts often don't mean much and can be virtually impossible to enforce in Chinese law. For example a contract is signed with a Chinese partner, but if things don't go to plan the partner will just tear up the contract and keep the factory! They won't get away with this with the big multinationals, but many smaller Western companies have had their fingers badly burnt.
It is possible to set up 'unofficial' factories (i.e. bribe a local government official and just build it) - there are many of these knocking out plastic mouldings and toys etc etc - but you can't build a car factory like that!
Multinationals generally approach central or regional government and things are then handled in a 'top down' fashion. Usually there are conditions attached to the project (e.g. some roads must be built, housing must be provided etc etc).
Car factories can be built relatively quickly in Europe and many regional and national governments are keen to give grants. Eastern European EU-accession countries seem to be a popular choice at the moment!
It really isn't as cut-and-dried as many would like to think.
Note also that we should be thinking of China in terms of opportunities - e.g. Germany exported about EUR20 billion to China last year (the Chinese elite are buying Mercs and BMW's and German factory automation equipment!). I don't know how much the UK exported, but I bet it wasn't much.
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No, that's not the case. To build a factory 'officially' in China (i.e. with all the proper permits etc) is a very protracted process since it involves getting 'licences' from city, regional and national government.
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here is a true story:
at the same time as planning permission process for sizewell "b" nuclear power station was initiated, a chinese consulted uk experts on site selection and were advised on safety critirea for population distribution. their response was "don't worry, we will move any population that is in the safety zone".
they did.
and their equivlent to sizewell "b" was up and running before the public inquiry and government granted permission for construction.
the point of this story is that if china sees that it is the national interest to build a plant, it gets top priority and nothing is allowed to get in the way.
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>China has overtaken the UK as the world's fourth largest economy, it emerged yesterday in what will be seen as a key economic landmark for the new century.
If I recall correctly it was just half the size of the UK economy in 2000. What really worries me is our productivity. The British worker is way behind most European workers and 40% less productive than an American. We need to buck our ideas up, that's for sure.
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What really worries me is our productivity. The British worker is way behind most European workers and 40% less productive than an American. We need to buck our ideas up, that's for sure.
Very true. Much of that is down to dismal levels of investment in modern equipment. Its an old old story.
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If this First Automotive Works 'Hong Qi' is anything to go by then I don't think Rolls-Royce need get too worried.
www.cardesignnews.com/autoshows/2005/shanghai/high...p
I reckon Posh + Becks would buy one though!
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Good grief! that's this year's supply of chrome used up then.
JH
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We need to buck our ideas up, that's for sure.
Just out of curiosity, do you include yourself in the "we"? I suspect not.
--
L\'escargot.
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In between the ad breaks on late night Talksport (I' don't listen to the 'sport' progs) I tune in to China Radio International & listen to what Bejing has to offer.
They were proclaiming the openining of the worlds largest oil (motor related) pipeline, a month or 2 back, ahead of shedule, to help with their increased demand.
& we've already used ours up!!
VB
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>> We need to buck our >> ideas up, that's for sure. Just out of curiosity, do you include yourself in the "we"? I suspect not.
Why on earth do you think that? I'm self employed. My productivity affects me directly in the wallet from one month to the next: I constantly need to buck my ideas up. In fact though I was talking not about individuals but the whole way we do things. We don't invest (capital projects that look good excepted; the year-on-year revenue stuff can go hang). We don't take risks. However we do allow our economy to be buoyed up by property price rises and the credit raised on it. It's fun at the moment, but under that sharp suit the emperor is going commando.
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>> >> We need to buck our >> >> ideas up, that's for sure. >> >> Just out of curiosity, do you include yourself in the "we"? >> I suspect not. Why on earth do you think that?
I said it because a lot of British people are only too ready to slag off the British working man and woman and British companies, and sometimes even Britain as a whole, whilst at the same time considering themselves to be in a superior class and not part of this system. I accept that this does not apply to you and I apologise unreservedly. However, the fact of the matter is that one reason that Chinese industry is on the up at the moment is that Chinese workers accept lower wages and a lower standard of living. They know their place and most British people don't. It may not remain like that forever in China, in fact I'm sure it won't. But at the moment that is the situation. Most of the problems at the moment in this country, both social and economic, are due to people not knowing their place.
--
L\'escargot.
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