In just over a decade, the auto industry in China has exploded. As of November 2009, China is the largest automobile market in the world, combining active partnerships with established foreign brands with a thriving, developing domestic market.
China's seemingly unstoppable auto power over the years has worried Detroit, Japan and Europe. Now, their concern may be warranted. China's budding domestic manufacturers and their 100-percent Chinese-made cars are now poised to enter the export market. So what does that future look like?
Less than thirty years ago, Chinese citizens were forbidden to buy cars. China lifted its control on car purchases in the mid 1980s, and the demand for personal-use automobiles has risen steadily since. Between 1990 and 2000, annual car production grew from just 50,000 to more than 600,000 vehicles. In 2009, the country pumped out 13.8 million cars and sped past Japan to become the world's largest automobile producer.
Last month, China set a new record for passenger car sales. Sales in March rose to 1.26 million vehicles, a 63 percent jump from a year ago, according to the China Association of Automobile Manufacturers. These record sales follow an impressive 2009, when China's market grew 46 percent to 13.6 million vehicles, compared to a mere 10.4 million in U.S. sales.
While Detroit slowly recovers from poor sales that lost the U.S. its top spot in the industry, it may never again be able to catch up to China. Chinese government incentives and tax cuts are driving first time Chinese buyers, and those already looking for an upgrade, to auto dealerships. And as car manufacturing plants in China are ramping up production to keep up with domestic demand, they're preparing for what looks to be the next frontier—exports.
The Chinese auto industry has made calculated moves to get to this next step. Numerically, the country is home to far more auto producers than the U.S. or Japan, and many of those are joint ventures with foreign automakers. By law, foreign car companies are required to partner with a Chinese company to do business in China.
Joint ventures in China include Volkswagen, General Motors, and Honda. Despite the famous foreign brand names, most cars made in China today are sold to Chinese consumers. China exported a mere 369,600 vehicles in 2009, according to the China Association of Automobile Manufacturers.
In May 1983, Chrysler's Beijing Jeep Corporation became the first joint venture for manufacturing complete vehicles. In 1997, Shanghai General Motors was formed, and a year later the first Buick sedan rolled off the production line there. Of the country's 47 auto manufacturers today, 26 of them are joint ventures, according to Automotive News.
"By forcing foreign companies to do joint ventures, they have been getting a free education on how to build cars and they are getting better at it," says T. Russell Shields, a founding officer of the Intelligent Transportation Society of America.
That's not to say foreign automakers haven't benefited from sharing their trade secrets.
This March, General Motors sold more cars in China than in the U.S.. Chinese domestic sales for General Motors and its joint ventures in China jumped 66.9 percent in 2009 to a record 1,826,424 vehicles. GM China holds an estimated market share of 13.4 percent and the company predicts sales in 2010 could top 2 million. Meanwhile, Ford Motor Company's joint ventures and wholly owned entities in China delivered record sales of 440,619 vehicles in 2009, an increase of 44 percent from 2008.
While many components used in U.S. cars are already manufactured in China—including the V6 engine in the Chevrolet Equinox and GMC Terrain—this explosive growth of wholly Chinese-made cars could soon mean U.S. showrooms will be filled with "Made in China" bumper stickers. The first of these vehicles to make it to the U.S. will likely be familiar American brands, mostly manufactured in China.
A General Motors document leaked last year suggested the company could be the first to import Chinese-made cars to the U.S., as early as 2011. If it goes through, the GM plan would do little harm to American autoworkers; virtually all of the lost jobs in this case would be Canadian.
You can also expect to see inexpensive, wholly domestic Chinese brands like BYD and Geely imported to the U.S. soon. But first, the cars need some tinkering. "They're not yet up to our safety standards," says Shields. "But it's certainly the case that the Chinese will be selling cars in the U.S. in a few years."
The trick will be to not to repeat mistakes made by the Germans, British, Japanese and Koreans. "Those early attempts showed the companies were immature in terms of style, content, quality and reliability," says George Peterson, president of the marketing and consulting firm AutoPacific. "It takes decades to really understand the American market."
Still, a significant number of Americans are already willing to buy Chinese, according to market research conducted by AutoPacific in 2009. Of new car and light truck buyers in the USA, 16 percent of respondents said they'd be willing to consider a brand from China. "This is a very high number," Peterson points out, only 11 percent said they'd consider a brand from India. "And those people are younger, more affluent and more highly educated than the typical new car buyer. If a Chinese brand could attract these people it could cause a huge ripple effect among not only the Big Three, but also the Japanese manufacturers selling in the USA."
In March, China's Zhejiang Geely Holding Group set itself up for the ultimate safety challenge. The company purchased the famously secure and boxy Volvo brand for $1.8 billion. The Washington Post reports that the acquisition risks tarnishing the brand without giving Geely the global boost it seeks.
In addition to improving safety records, the Chinese government and automakers are aiming to make the China auto industry a leader in greener cars. Billionaire Warren Buffett first shined the spotlight on the promise of China's green auto industry in 2008 when he invested in BYD, a Chinese battery and electric car manufacturer.
Aside from the export value of greener vehicles, the Chinese government has a huge domestic interest in cutting fuel use and emissions. Thanks to the auto boom, China is now the second largest consumer of oil, behind the United States.
"China's vehicle population is going to continue growing rapidly, possibly becoming the largest in the world sometime this decade," says Vance Wagner, International Policy Adviser at the Vehicle Emission Control Center for the Ministry of Environmental Protection, China.
To help curb fuel use and emissions, China now has more strict fuel economy standards—36.7 miles per gallon—than the U.S., Canada, and Australia. "Gas guzzler" taxes also encourage Chinese buyers to purchase cars that get better mileage.
Meanwhile, manufacturers hope to jump on the global green trend set by Toyota's Prius.
Last year, Chinese automaker BYD announced it had plans to sell its 5-seat electric car, the E6, in the U.S. in 2010. But The Street reports a more recent press release suggests the company has rolled back its ambitious plans to produce a mere 100 E6 vehicles in the company's home town of Shenzhen.
Regardless, analysts say electric cars are bound to gain popularity and momentum soon and BYD and other Chinese electric vehicle and battery manufacturers have set themselves up to catch that high-tech wave. Before we see BYD or other Chinese-brand and Chinese-made electric cars in the U.S., we'll likely see Chinese-made electric batteries in American, European, Japanese, and Korean branded vehicles.
On the forefront of this move is electric carmaker Coda Automotive, which may soon open assembly plants in Los Angeles County, according to the Los Angeles Business Journal.
Although the company is Santa-Monica based, the Coda all-electric sedan would be manufactured primarily in China. The car's chassis and other parts will be assembled in Harbin, and the batteries will be put together in the port city of Tianjin as part of a joint venture with one of China's biggest battery manufacturers. The car and battery would then be shipped to the U.S. for assembly and sale, with a price tag of about $40,000.
Detroit will keep watch over its shoulder for China's imminent move onto American home turf. From their own operations in China, they have a good view of what the Chinese are up to. Of special concern are the inexpensive, energy-efficient markets, where U.S. companies have lagged behind. But until a distributor is set up to begin selling Chinese cars, Peterson says, "it appears the Americans aren't really concerned." Perhaps they should be. American consumers are already primed to purchase Chinese cars when they finally do arrive.
Still, China is not entirely the evil enemy. Business is booming for Detroit-based companies in China today, and those partnerships are paying off at a time when sales in the U.S. have been less than stellar.
"We've helped educate the Chinese and they're going to be a big force," says Shields. "And that won't be too long from now."
"past" not "passed"
China can afford to put out huge tax breaks and government incentives because they have such a ridiculous amount of money, primarily from us and our trade deficit. I'm sure this will give them a huge advantage in many markets in the coming decades.
Quite coincidentally, the chinese are becoming more energy efficient than the first world nations. Why? because most of us can't grasp the fact that most times the looks of a car is just better than the power. Don't get me wrong, I would love to have a 500 hp, 4x4 diesel truck that can tow a Caterpillar 797B dump truck, but an electric powered Tesla Roadster with comparable performance to a Lamborghini would also do. Or a Pirus, for its looks.
I would be happy to buy a car made in China if it was safe, reliable, efficient and cheap.
The seeker of knowledge who seeks to reach beyond the stars to go where no mans gone before to see things no man has seen and bring these experiences back for the whole world to hear and see.
Not to sound messed or anything but this is not good.Ok let me say this the US primarily exports agriculture food .K.
now we get most of what we want through imports we are in debt to so many countries couse we arnt making enough of are own money .when you need help with a problem you probably call a help line for that product youll either here a person from india or US but most likely india and if you buy a toy for your kid it will most like'ly say made in china now my point is. we are becoming to reliant on foreaign goods if say somebody wanted to sabatage our stuff they needent do it here they could leasurely go to china poison us or something and sit back and watch us suffer ya were good and protecting our stuff here but we have alot of imports cant protect them all a disaster happens over their we will be affected to it's a ripple affect wake up your children and their children all depend on your desisions what will they do when they need a job and they have to go to another countie for a good paying job that car company thats in china .could be here providing employment for you, your kids, and the future generations.and the same applys to countless other companies people see a cheap offer and go for it but we get none of the profit (are economy)if it aint are company and buisnesses see a quick way to make money ya are companys are doing good what happens when we have nothing to offer them they could kick are companies out and then make us buy their cars are prosparity is from are buinesses what happens when china offers you a car for cheaper of their brand youll buy it and think what ever but what you not thinking that less money the countrie makes means less money in taxes less money for the gov to build roads,schools,parks, and the many other things people take for granted their thier couse we have money if our countrie gives nothing it will get nothing we need to nand together and not think with wallets and think more of our kids couse you anybody reading this will not live forever and you die you kids will still be here and their kids so make a better future for them so they can prosper to instead of cleaning up your mistakes.
"Less than thirty years ago, Chinese citizens were forbidden to buy cars. "....I've never heard of that story. Is that true?
Anyway, where the market is located the future of the car lives. Don't you think so?
Brands of Chinese cars emerged in world auto industry, either with copy technologies or innovations. In the last year, acquisitions of multiple U.S. brands by Chinese manufactures did suprise the world. That should be an obvious proof of the future of the car, which is in China.
Every year, new auto brands from all over China and new designs by domestic manufactures have attracted the China's most car buyers, also show the great capacities of production and innovation to the world. It is undoubtfull that the future of world auto industry will stay in China where our outstanding brands, like Geely, Chery, BYD etc., will dominate the world.
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First off as a Canadian "If it goes through, the GM plan would do little harm to American autoworkers; virtually all of the lost jobs in this case would be Canadian." Ouch.
But to the point, even if I assumed that they could make good electric cars that people actually want in a state of the art factory that creates as little pollution as possible. How many years would it take for me to drive the car to make up for all the pollution the ship made while shipping it here. Not to mention the trucks that will be distributing it.
You've completely missed a critically important trend. The Chinese government is offering very large rebates on fuel cell vehicles; autos and buses.
They have developed and employed for the Shanghai Expo many electric buses with supercapacitors that are charged via overhead canopies during passenger stops.
The primary goal is not to compete with internal combustion, but to leap to the next generation and lead in electric and fuel cell vehicles.
At the same time Steven Chu, Obama's Secretary of Energy cancels funding for the Hydrogen program and tells us to paint our roofs white. Sorry, I expect; NO, demand more than that. Congress is responsible for getting funding back to the Hydrogen program (at a reduced level) One of the only government departments or programs to receive a funding reduction. Genius, isn't it? Time to learn Mandarin people, we are being led into the abyss.
I personally think that this rise is a good thing. We moved so far away from the gold standard, and have raised our standards of employee care, but lowered our standards for product quality that it was inevitable. Besides...as to the whole "americans having to go to other countries to seek employment"...the fact that so few americans do so makes us far stranger than you would imagine.
I don't know about you guys, but I wouldn't even consider buying a chinese car for at least 10 years after they set foot over here. How long has Hyundai been selling cars over here? The Hyundai accident is about on par with a 15 year old Golf. They're just starting to make cars that don't suck now. It would take China at least that long to get any kind of trust over here. And let's face it, the Chinese rip anything off from iPhones and Rolls Royces to F-18 Superhornets. Inviting Chinese cars over here would just mean another Kia, making cheap immitations of everyone elses cars. As cheap as they would be, I wouldn't trust the masters of counterfeit to make my car any time soon.
I'm pretty sure the future of the car will not be existant. China and the world are moving towards sustainable living, such as mass transit.