By on December 30, 2009

This is the mystery man's factory...

Why should I want to be Toyota? They’re losing billions.

Today’s Quote Of The Day comes from the executive of a certain up-and-coming automaker with dreams of becoming a global player. Think you know who it is? Here’s a hint: it’s not Ed Whitacre.

Geely CEO Li Shufu is the man responsible for that little nugget of wisdom, as he gloats about his firm’s success to Bloomberg. With $334m in backing from Goldman Sachs and a stock that rose 573 percent on Honk Kong’s Hang Seng index this year, Li has good reason to be confident in his company. But confident enough to ignore the keys to Toyota’s success, which has been unmatched in the industry until about 18 months ago? Not quite. Li’s bon mot was more of a jab at archrival BYD, which has publicly stated that it intends to surpass Toyota by 2025. In fact, just a year ago Li told Gasgoo:

We would like to be a global brand just like Toyota. We will make the products at locations close to the market, and develop our models and technology in line with demand. We will produce many models at a low cost, just like Toyota.

In any case, Geely’s ability to compete with Toyota will soon be tested outside of the Chinese domestic market. In August, Geely begun production of  its first “global” model: the Emgrand EC718. As this ad unsubtly indicates, the EC718 is clearly intended to be Geely’s warning shot at the West. However, even China Daily admits that Chinese manufacturers are finding the European market a tough nut to crack, with five Chinese firms selling only 745 units in the EU in the first three quarters of 2009.

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12 Comments on “Quote Of The Day: Mo’ Volume, Mo’ Problems Edition...”


  • avatar
    ash78

    I try to be an objective forward-thinker in business matters, and I’m aware at how quickly Japan (and later Korea) improved their own reputations in the auto arena, but I still can’t shake the feeling that China is going to struggle for a while on the global stage. Not financially, but in terms of acceptance in well-established markets with money to spend.

    Maybe it’s just a knee-jerk reaction to the reverse engineering, outright design copies, and excessive hubris I see coming from so many of their firms.

    • 0 avatar

      Me, too. But IF they do not repeat the errors of heavily centralized corporations like GM or Mercedes AND IF they do not underestimate the task of organizing international businesses (paying due respect to local markets and traditions) they may succeed. Big IFs…

    • 0 avatar
      Ernie

      Unfortunately (or fortunately?) I suspect the Chinese companies’ (or rather the owners therof) will have far too much pride to learn from Japanese mistakes.
       
      I read an article in (think) forbes? early this week about how lots of companies are using subsidized government loans and lots of cheap credit for growth that may or may not pay off tomorrow.  Sounds very familiar . . .
       
      As for ‘reverse engineering and outright design copies’ . . . America forgives.  I think I’m the ONLY person that noticed that the 2006 Nissan Maxima was a dead ringer for the Saturn ION from the side.

    • 0 avatar
      akitadog

      Ernie,
      Actually, I had that exact same impression when that body-style Maxima first came out in 2004, and noted so in an Edmunds discussion forum. Actually, I called it a fat Saturn Ion.

  • avatar
    Steven Lang

    Let’s put this in perspective.

    Chinese manufacturers have the absolute worst quality in virtually every type of motorized machine one can think of…

    Why?

    1) Communism of yesterday translates into the corruption and government involvement of today.

    2) They have virtually no laws to protect the inventors and innovators amongst them.

    3) A cost focus uber alles is wonderful if your simply building a simple or commodity like product. Cars are neither.

    Chinese companies may be able to buy yesteryear’s prducts for cheap. But they not only need to build it. They need to build it into a high quality product and differentiate it in a field that is loaded with high quality alternatives. Even if they were 10% cheaper, their quality gap is still a gaping chasm loaded with crappy plastic Chinese scooters and  Western car designs that are damn ugly once you get past the skin deep surface.

    Five years from now they still won’t be ready for prime time. 10 years? Perhaps. But the Chinese government will have to get out of the way of the entrepreneurs and protect their proprietary interests. I don’t see that happening without a ‘black swan’ leader or force guiding it.

    • 0 avatar
      Robert.Walter

      Hi Steven, Love the insight and the ref to the Black Swan Leader/Event …

      I might add that for the same reason, the Opel deal to the Russians would have been confronted with similar issues and, perhaps due to the kleptocratic nature that is Russia, may have had even worse chances vis a vis the Chinese.

    • 0 avatar
      jet_silver

      My guide has been to buy nothing made in China that you have to trust.  You don’t have to trust your shower curtain, flip-flops or kitchen tongs.  You have to trust your tires, your food, your car, your electrical appliances (at least in terms of fire safety).  When Japanese products started appearing on US shelves they turned out to be well engineered and it’s exactly the opposite with Chinese products – they work for a time and then fail miserably and dangerously (the Bluesky toaster-oven I recently replaced with a DeLonghi in my France house is a good example of that – its electrical wiring smoked).
      The arrogance Ernie mentioned upthread is going to kill Chinese attempts to build businesses that rely on reputation.  A Chinese company just bought mine and the comments I heard from the CEO made me want to laugh.  His arrogance is going to cost him the purchase price of my company because more than half the staff are leaving – he’ll have the designs and no idea why they are the way they are.  Multiply that by a few thousand incidents and I see a fortune being frittered away – and that is one market I am going to figure out how to exploit.

  • avatar
    FreedMike

    We all know the Chinese can build cars cheaply. Can they build them well? That’s the question. We will know soon enough.

  • avatar
    Dimwit

    The past history of the Chinese is telling: they can and will make a decent product. One. After that they will shave and chivvy until it’s crap and it won’t take long. They will do it over and over, wasting brand equity until nothing is left. Watch SAAB for the arc. A good, proven design. Still fairly thought of. Within 5 years you won’t be able to give one away.

  • avatar
    don1967

    If the Japanese and the Koreans could turn things around and become bona fide global players, why not the Chinese?   Their potential is huge.   But there are also risks in depending heavily on cheap, domestic labour that is under communist rule.   Political unrest, rising shipping costs, and a devalued U.S. dollar could all take some of the air out of the China bubble.

  • avatar
    shaker

    I type this on a Chinese-made laptop – a high-quality item that’s given me no trouble in 3 years. This is due to the OEM (Asus) developing stringent requirements (usually based on ISO standards) that the manufacturers must follow. Since the Chinese car companies won’t be overseen by external forces (except for the safety requirements of the destination country of sale), they’ll be free to cut corners (which will doom them), or try to build brand equity with quality product (at first, anyway). If this succeeds in destroying competition to the point where the only affordable cars will be Chinese-built (like most of our consumer goods),  then it will be ‘mission accomplished’ for the Chinese – they will become the predominate manufacturer of the world, and THEY will set the ISO standards. I think we all know what that could mean.

  • avatar
    windswords

    Volvo’s lament
    (Sung to the tune of Shoo Fly)
    Shufu, don’t bother me
    Shufu, don’t bother me
    Shufu, don’t bother me
    For I (used to) belong to somebody


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