Chinese Car Exports Retreat, Return Under Cover

by Bertel Schmitt

Published: October 28th, 2008

chinese car exports retreat return under cover

For the few past years, European and American automakers looked to Chinese carmakers with hope and trepidation. They hoped the booming Chinese market would lift their worldwide sales. It did. They feared the Chinese would export cars en masse, swamping Europe and the U.S. with cheap vehicles. They did not. For various reasons (crash tests, emissions, the economy), the arrival of the four-wheeled Yellow Peril was a non-starter. What little exports the Chinese managed went to second- or third-tier markets like Africa or South America. Even those are are going down, down, down. In August, China exported a mere 44,400 units, a decline of 22.18 percent month-on-month and 11.29 percent year-on-year. This according to numbers straight from the China Association of Automobile Manufacturers, quoted in Gasgoo, which calls the news “discouraging.”

Chinese companies who had Europe in their sights are holstering their guns. The German trade publication Autohaus reports that Chinese auto maker Geely is back-pedaling from prior announcements of an entry into the European market. With unusual candor, Jie Zhao, Vice President of the Zhejiang Geely Holding Group said: “Our products aren’t ready for the European market. We are realistic. We will not get ahead of ourselves.” According to Jie Zhao, they may reconsider a market entry “after 2010.”

Instead, Chinese exports are happening under cover. Under the cover of your car, to be exact. More and more parts in your American or European car are already made in China. Compared to 2002, exports of automotive products s urged twentyfold to $41b last year. With cost cutting and job cutting being the mantra, this is just the beginning. Gasgoo reports that Daimler AG plans to increase its sourcing of automotive components from China nearly eight-fold within four years. The luxury car maker will buy $3.25b worth of car components per year in China, up from the $400m for this year. Will your next S-Class Merc be Made in China? Partly, at least.

Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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Bertel Schmitt on Oct 29, 2008

One more item, then I stop: Your "Lowest, most unskilled workers. Dish washers, janitors, etc." usually don't get paid minimum wage, because officially, they don't exist. See, in China, if a Chinese moves from the country to the city, he or she needs a permit. It's a drawn-out process, akin to emigrating to a foreign country. One catch-22 is that you need a job (chopped and certified on paper) and a place to live (chopped and certified on paper.) So tough luck if you move to the city to find both. In the nation's capital, officially, these people are called "Wai Di Lai Jing Wu Gong Ren Yuan" (Other city's people who come to work in Beijing.) The haughty version would be "Wai Di Ren" (OTB - Other Than Beijingers.) A dishwasher, or a waitress, will make maybe $60 - no benefits, because they are not here. They also don't appear in the census. The estimation for Beijing is 5 million. Which would bring the city of 17 million to 22 million.

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Dilbert on Oct 29, 2008

Typical expat attitude, I'm in China so unless you are here you won't understand. Actually I'm Chinese, and have been in and out of China working in a MNC. What I quoted were figures from my own company and customers we deal with, as well as a rough estimate from online sources. These days, you don't need guanxi to earn high wages, you just need to be good at what you do. My customers are constantly making offers to my best guys. Funny you should bring out the cultural familiarity as an expat, did you pick up the 250 reference from the silk market?

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