By on October 28, 2008

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 surged 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.

Get the latest TTAC e-Newsletter!

18 Comments on “Chinese Car Exports Retreat, Return Under Cover...”


  • avatar
    menno

    “Will your next S-Class Merc be Made in China? Partly, at least.”

    Well, THAT will help the reliability factor.

    It’ll help it from the basement to the sub-basement, if most other Chinese goods are anything to go by.

    Sometimes I think the wealthy are idjits. Other days, I know they must be.

  • avatar

    @ menno : Not so fast. In the second job, which I must hold to augment the slave-wage salaries TTAC pays its Chinese correspondent, I sell the aforementioned parts . (This also as disclosure of a possible interest in the matter.) I can tell you that Chinese parts CAN be first rate – if their quality is being watched closely. This is what the big corporations do religiously. They have their own purchasing arms in China, they have engineers at the Chinese plants 24/7. The best and most feared QA guys are actually the Japanese who have a historical leg up in these matters. A supplier that is not TS16949 rated may not apply. Honeywell, NAPA etc. more and more sell boxed Made in China. If bad parts are imported from China, then its either due to stupidity or greed. Both exist.

  • avatar
    Dutchchris

    The Chinese car exports maybe down but they are certainly not out. Especially BYD is the one to watch. They are an advanced battery manufacturer that branched out in the car business and is now seeking to merge the two technologies into plug-in hybrid and all electric vehicles. They want to have a 100 mile range PHEV out this year (F3DM) and an all electric car by mid 2009.

    This is a sign of things to come. If you have the battery technology you have the future in the car business. Seems Warren Buffet noticed this too when he decided to drop over $200 million in this company.

    Expect BYD to be one of the big names in the car industry in the not so distant future!

  • avatar
    menno

    Bertel, all I have to work from are the items for sale in the states, usually “branded” electronics and household goods, which seem to last about 12 to 18 months before going “pffft” – virtually all of them made in China.

    Not that American made stuff is any better, mind you (assuming you can find any).

    Bought a new washing machine (made in the USA) a bit over 5 years ago. The prior one lasted 6 years. The new one lasted 5 years and 3 months. The extended warrantee (bought after the prior fiasco) was for 5 years.

    So we went out and spent twice as much (lucky to be able to do so) and bought a Bosch front loader, made in the old country. And bought a 5 year extended warrantee, too….

    The point is, my parents had an American made washing machine (Norge) which they bought in the late 1950’s and which ran until the late 1970’s. The replaced it not because it died, but because they moved and figured they may as well buy a new one where they were going rather than haul it.

  • avatar
    dilbert

    First of all, a highly skilled factory worker in a typical large Chinese city is roughly $1500, flat rate, no overtime pay, and very little in terms of benefits. A highly skilled factory worker in US/Japan/Germany? ($35×160 hours) $5600 plus union benefits and insane overtime. Pay the Germans like the Chinese or vice versa and let’s see which one has higher quality products.

    Secondly, “Yellow Peril”? You must’ve went through the Michael Scott school of diversity training. You are supposed to be the Chinese correspondent, seriously…

  • avatar

    @Dilbert: Make that $150 – $250 a month for a worker in the provinces (where all the factories are, boy, do I ever know it …) However, his $150 buy much more over there than here, and are way more than what he could make back at the farm.

    The trouble is not the worker. They are eager to learn and proud of what they do. Now when the factory owner takes the profit and invests it in US real estate or the stock market, that’s a different story.

    Re Yellow Peril: Despite of what you hear, the Chinese like to laugh and are much less uptight than some in PC-Ville. “Yellow Peril” was approved by the in-house censor with a smile.

  • avatar
    autonut

    Perhaps cars are not coming, but I saw some “yellow” motorcycles and mopeds in Europe in good quantity. Their major appeal is price. Motorcycle for the price of Vespa scooter – hard to compete. Also, during recession, as now, motorcycles and scooters probably will drastically outsell cars in the rest of the world outside US & Canada. Never mind bicycles.

  • avatar

    @menno: That Bosch/Siemens frontloader may have been Made in China, at least partially. Bosch makes washing machine motors, vacuum cleaners and other in Nanjing, China. Washers are assembled closer to their markets, due to transportation costs. A washer consists of a lot of air, and sometimes a slab of concrete in the bottom. No sense filling containers with that.

    Bosch is a prime example for “Made in Germany” – from Chinese parts.

    @Dutchcris: True. The Chinese have a long history in alternate energy. Their now Minister of Science and Technology Wan Gang (see Wikipedia) is an automotive engineer. He worked for Audi for many years and headed the 863 Program (see Wikipedia) before becoming President of Tongji University, which is famous for its Anting Automotive College. As mentioned elsewhere on TTAC, Anting had operative fuel cell cars for many years. Details: http://chinaautobiz.blogspot.com/2008_10_23_archive.html – With BYD, Buffet bets on a horse with pedigree.

  • avatar
    dilbert

    According to Wikipedia, the 2007 GDP per capita in China was $2034 and the PPP or “buying power” of that money was equivalent to someone who has $5300 in the US.

    Considering that 800 million people are still living in rural areas and dependent on unskilled labor to make a living, $250 a month for a skilled factory worker (the factory may not be in downtown Shanghai, but it’ll be in a city of at least a quarter to one half million, which in China is considered a small city or big town) is really low balling it. But be it $250 or $1500, the point is the same about quality vs. wages.

    I don’t know who your in house censor is, but just because I can call my closest buddy any number of names doesn’t mean I can say that on the internet about Chinese people in general.

    Not meaning to be harsh on you, I’m glad that China is getting some attention on this website. Regardless of how it’s perceived, at least this site recognizes the tidal wave heading our way, and that’s more forward looking than a huge number of other pubs.

  • avatar
    joeaverage

    Chinese stuff is everywhere. While it may be in your Bosch washer, it is certainly in Harley-Davidson motorcycles. You know – that all American legend? Worked on a project at my last employer (before I took a step up) and the gas tanks (among other parts) was made in China…

    Tough to buy all-American these days.

  • avatar
    joeaverage

    Chinese stuff is everywhere. While it may be in your Bosch washer, it is certainly in Harley-Davidson motorcycles. You know – that all American legend? Worked on a project at my last employer (before I took a step up) and the gas tanks (among other parts) was made in China…

    Tough to buy all-American these days.

    FWIW friends who deal in them say the Chinese scooters last about 3-4 years and they are ready for the junkyard – too expensive to maintain them when new ones are so cheap.

  • avatar

    dilbert: In China, anything below a million is called a village ….. I’ve been in cities of 4 million the world has never heard of.

  • avatar
    Areitu

    If the Toyota Way works around the world, I don’t see a reason why applying similar methods to part manufacture wouldn’t work in a Chinese factory. Supposedly, at some point, Japanese companies with American suppliers would order a larger quantity than they would from a Japanese factory, expecting more defective parts and simply throwing them away.

    # Bertel Schmitt :
    October 28th, 2008 at 1:40 pm

    dilbert: In China, anything below a million is called a village ….. I’ve been in cities of 4 million the world has never heard of.

    Very true…we only hear about maybe 3 or 4 major cities. My dad has a factory in a costal town south of Shanghai with a pop. of 7 million. Most Chinese provinces have populations almost as large as the US.

    # Bertel Schmitt :
    October 28th, 2008 at 12:43 pm

    @Dilbert: Make that $150 – $250 a month for a worker in the provinces (where all the factories are, boy, do I ever know it …) However, his $150 buy much more over there than here, and are way more than what he could make back at the farm.

    The trouble is not the worker. They are eager to learn and proud of what they do. Now when the factory owner takes the profit and invests it in US real estate or the stock market, that’s a different story.

    Very true. To add to that, most factories offer room & board, or a subsidized version of it. If the factory treats the worker well, they bring more people in from their village. A couple years ago, Chinese workers made maybe $80 a month, so there’s been somewhat of an improvement.

    As far as workers and factory owners, the picture isn’t always so rosy. Some factory owners promise high wages, but defer payment, sometimes for months at a time.

    Workers sometimes steal from the factory or work slowly (soldiering) or simply can’t handle it and quit outright for a retail job if they can find one. Some workers at my dad’s factory have stolen metal sheets to sell for scrap. One guy apparently tried to lug off a large lump of lead under his shirt once.

    As far as Chinese cars go…my dad rode in a lovingly restored Ford Model A Tudor with a high compression 4-cylinder flathead engine a few years ago and he immediately commented that Chinese cars ride, sound and drive exactly like that.

  • avatar

    Beijingreview, May 11, 2007:

    – Current legal minimum salary levels as a comparison (yuan per month):

    Benchmarks

    Beijing: 640

    Shanghai: 750

    Guangzhou: 780

    First-tier city average: 723

    Central China

    Hefei: 410

    Wuhan: 460

    Taiyuan: 550

    Changsha: 600

    Zhengzhou: 480

    Nanchang: 360

    Central provincial capital average: 476

    —————

    China Daily, June 28 2008

    “From July 1, the minimum [monthly] salary for [Beijing] city employees will rise from 730 yuan ($106) to 800 yuan, or 4.6 yuan per hour.”

    ———————

    1$ = 6.8430 Yuan

  • avatar
    dilbert

    Minimum legal wages, for the lowest, most unskilled workers. Dish washers, janitors, etc. People in a modern auto factory; mechanics, technicians, assemblers, machine operators, welders, etc, are not in that category.

    My first post cites a “a highly skilled factory worker in a typical large Chinese city” as example.

  • avatar

    Dilbert: you need to get over here. I ran your comments by a number of highly skilled Beijing office workers. They all rolled their (there you go) slanted eyes and said “this is written by a 250.” They didn’t mean dollars. It takes familiarity with the Chinese culture to understand that reference.

    Areitu is right. The typical factory worker, and that includes welders, machine operators, assemblers, make close to minimum wage. Then they get free room and board. At $150 a month, they would pay next to no personal income tax and can send the money home. Since January, this worker is officially covered by health insurance and social security – paid by the company in full.

    $1500 a month? That would be the salary of a mid-level engineer, if he’s lucky and has the necessary guanxi – connections.

    Trust me, I don’t pull these numbers out of thin air. I lived and worked and had businesses here for years. In my downtown Beijing company, an entry level secretary who speaks English and has a university degree makes $300 a month. And she’s happy. I’d like to pay her more. But the senior Chinese who handle these matters say no. Don’t upset the system.

  • avatar

    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.

  • avatar
    dilbert

    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?

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • PrincipalDan: My perfect spec? XLT in Area 51 Luxury Package – spray in bed liner and power drivers seat is...
  • Russycle: Did GM just start doing drug tests? The company I worked for 25 years ago tested its drivers. How come the...
  • tonycd: Lou, this is a great answer. It’s functional impairment that matters. All the rest is just the...
  • Arthur Dailey: @SCE 1) If a job was not useful to a company then they would not hire someone to perform it. And as...
  • ajla: I think I’d actually stick with the hybrid. If I wanted something more powerful or more capable then...

New Car Research

Get a Free Dealer Quote

Who We Are

  • Adam Tonge
  • Bozi Tatarevic
  • Corey Lewis
  • Mark Baruth
  • Ronnie Schreiber