The Chinese are, indeed, coming…but a rational look at what’s on offer suggests that the Chinese auto revolution is still some way off.This isn’t the first blog that I’ve posted regarding Chinese vehicles and I know that the subject is quite a contentious one at the moment, but the hysteria that appears to surround the “Chinese Invasion” seems to overlook a couple of things that GM Holden’s new boss, Chris Gubbey, has summed up quite neatly in a recent interview with GoAuto.
According to Gubbey, the vast influx of half-priced Chinese cars set to flood the Western markets is something of a fallacy created by those in awe of China’s incredible production resources. Let’s not pretend that Chinese models will not have some sort of impact on the marketplace, the country’s economy is booming and the labour and resources at its disposal are of a scale that would send most Western carmakers into a cold sweat, but there are a couple of aspects that we must not lose sight of in the midst of this emerging phenomenon.
Gubbey claims that the costs involved in bringing these Chinese models up to the quality and safety standards of their established counterparts will largely negate the price gap between the two offerings.
“A lot of the cost of the product is in meeting legislative requirements in developed markets and it is about being able to offer all the technical things people want on their automobiles,” said Gubbey. “They have to pass the crash tests.”
Gubbey, who has spent the last six years in China with GM has also noted that the cheap labour situation cannot last. He points out that some 10 percent of the sticker price on many current models can be attributed to labour costs. Gubbey has witnessed that there is now mounting pressure on Chinese carmakers to increase their labourer salaries as the cost of living in cities such as Shanghai increases. This means that models retailing at bargain basement prices in China will only prove marginally cheaper than established brands…and we know where the smart money tends to go.
Gubbey’s prediction for Chinese cars is two-fold; The mounting demand for greater quality and safety will mean that the Chinese will never be able to produce a car for half of what established brands can, and it will be another five or so years before the Chinese begin to catch up with the rest of the automotive world.
That said, Western carmakers cannot afford to breathe a sigh of relief just yet. The Chinese government has placed a good deal of pressure on local manufactures to develop their own brand and export to new markets. The Chinese firms are on a mission to improve the aforementioned quality and safety issues. Gubbey also gave a wakeup call to those who see the Chinese as little more than brand imitators. He pointed out that many major design and engineering houses are largely manned by Chinese personnel and that “the days of copying are over…They are developing their own product.”
Many are also aware that there are other markets such as Vietnam, where safety and quality are not such great issues and the Chinese companies can get the opportunity to really gain a greater foothold on the global market before attempting to tackle Europe and North America.
Gubbey summed up the value-for-money aspect of the new Chinese brands by saying, “In real terms, you will be getting less if you are paying substantially less. At the end of the day the buying public will start to recognise that.” Having sampled some of China’s wares, I would be inclined to agree with him wholeheartedly…don’t believe the hype, but don’t ignore it either.
