Ay, Chinese Caramba: Cheap Cars Invade Mexico

Bertel Schmitt
by Bertel Schmitt
ay chinese caramba cheap cars invade mexico

As much as U.S. automakers, especially GM, rely on China to bolster their global sales numbers and to supply cheap parts, Detroit is scared excrementless that the Chinese may apply the Western technology which had been exported to their shores, and sell cheap cars in the U.S. So far, it hasn’t happened. But it’s happening in America’s underbelly and NAFTA partner Mexico. “FAW Group Corp., one of China’s three largest domestic auto manufacturers, has begun selling new cars for as little as $6,550 in Mexico in what is believed to be the first foray by a Chinese auto-maker into North America,” Canada’s Financial Post reports. This being a Canadian paper, they are probably talking Canadian dollars, so in real money, it would be $5550. Or more like $4999. Scary.

A boatload of about 6,000 FAW cars have been brought to Mexico by Grupo Salinas, a specialty retailer. “They’re not all sold,” company spokesman Daniel McCosh said. “The higher-end and the lower-end vehicles are moving better than the mid-priced models.” That Mexican beachhead is troubling news for Detroit.

Small, cheap cars are suddenly big in the US. “Small-car sales doubled during the first half of the year as gas topped $4 a gallon. By the end of November, sales levels had tumbled 63 percent from the peak. Even with the drop, the segment is holding up better than others because overall vehicle sales are so weak,” reported ABC News. Amazed even Ford Motor analyst George Pipas: “It’s surprising.” .

China’s central government, which controls FAW, has been pushing the export of Chinese-made vehicles. A push they need, because Chinese exports are going nowhere. China’s auto exports fell 46.5 percent in November compared to the same month last year, Gasgoo says, citing data from the China Association of Automobile Manufacturers. A scant 35,800 cars were exported from China.

Foreign “demand is quite unstable,” said David Zhao, a Toronto-based research analyst at Frost & Sullivan’s Automotive Practice. “FAW and other Chinese automakers are still implementing their globalization plans. But since the current financial crisis hit, their plan might be adjusted. For the moment, they still want to stay within the Mexico market. They want to accumulate experience.” They are building more than just confidence. FAW is building a car assembly plant in Mexico.

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  • Bertel Schmitt Bertel Schmitt on Jan 10, 2009
    What I’m more curious about from a inside perspective is, do you think the joint-venture partners are going to get thrown out on their asses or do you think they are actually establishing some kind of valuable permanent presence? It is pretty much an open secret amongst the expat contingent working for the joint ventures - and the secret gets more open as some beers are consumed - that "China wants us out in eight years time." You see a big push in China for "own brand" development. There are also noises from the government that any assistance to the car industry will be focused on indigenous brands. Never mind that the state controlled biggies - FAW, SAIC, Dongfeng et al - are also the biggest players in the joint venture game. At the JVs, presence of foreign personnel is already being thinned out. As their tour is up, they are not replaced. JVs usually started with a funny "twins" system, where a Western and Chinese guy shared the same job. This was of course inefficient, but a good learning experience for the Chinese twin. He can do the job by himself now. I don't think it will be a "thrown out on their asses" scenario - the Chinese are too clever for that. They won't do a Putin. Their technologies are still too intermeshed with Europe and Japan. It will be a gradual process. It's natural - in other fields it's called "disintermediation."

  • Bertel Schmitt Bertel Schmitt on Jan 10, 2009

    @ra_pro: I'm sorry, you are wrong. You need to look at actual age distribution graphs before rehashing the "one child" stuff. China has no dearth of babies. The one child policy is already being relaxed. Even before that, only "35.9% of China's population was subject to the one-child restriction," says Wikipedia. The policy was enacted in 79. It will be 2040 before that generation retires. Europe and Japan had a de-facto one or no child policy since the early 70's (when the pill came out.) Birth rates halved. Germany's and Japan's population graphs look like nuclear mushrooms. The population peaks are heading towards retirement. A big reason for China's sudden growth was that a population peak entered the 20+ range, where you found families, need apartments, get jobs, buy refrigerators, cars .... Birth rates - whether affected by law or by personal choice - have a long lag time. Babies not born now won't be missed for decades. In Germany, the median new car buying age is in the 40's. That's where Germany's population peak is at the moment, and that's why you don't see the big contraction as in the US. In China, mass motorization has just begun. It has decades to grow just to catch up with motorization in Western countries. Even a zero child policy wouldn't affect that. In 30 to 40 years, it would. Mexico, by the way, has a very healthy population graph. The US looks decent, not as bad as Japan and Germany at all. The boomers are retiring. But they made more babies than Germans or Japanese.

  • Zerofoo "Hyundais just got better and better during the 1990s, though, and memories of those shoddy Excels faded."Never. A friend had an early 90s Hyundai Excel as his college beater. One day he decided that the last tank of gas he bought was worth more than the car. He drove it to empty and then he and his fraternity brothers pushed it into the woods and left it there.
  • Kwik_Shift There are no new Renegades for sale within my geographic circle of up to 85 kms. Looks like the artificial shortage game. They bring one in, 10 buyers line up for it, $10,000 over MSRP. Yeah. Like with a lot of new cars.
  • Ribbedroof In Oklahoma, no less!
  • Ribbedroof Have one in the shop for minor front collision repairs right now,I've seen more of these in the comments than in the 30 years I've been in collision repair.
  • Tassos And all 3 were ordered by Fisker's mother. Seriously, given Fisker's terrible record of Failure in the past, only an utter loser, (for example, VGhost or Art Vandelay?), looking for a BEV terrible enough to be a proper replacement of his 11 mile range Fiat 500E, would order one of these. (apart from Fisker's mother)