A look at China and Cars

Op-Ed by P. Wimsett

These days you might see conspiracies everywhere you go, at least where China is concerned. However a closer look at car making in China presents an interesting conundrum. Although China has built up a reputation as the world’s factory (due to various tax exemptions and the ability to operate without too many rules and regulations) other countries have proved better in exporting cars. And China’s domestic market could be a lot better.

The question might not be why the Chinese car market is huge, but why isn’t it bigger?

Not that cars aren’t important of course, its just that other materials have been more important. It just has never been a priority for the country. Although 46.8% of China’s GDP is from manufacture, most of this is chemicals, steel, and cotton. The manufacture of cars goes way down the list. Typically, countries that make there own steel do well in the vehicle manufacturing arena.

When you consider the entrepreneurial spirit of countries such as the US and Japan it doesn’t come as that remarkable that these countries sell more cars. But China gives them a run for their money-or did until very recently.

Last July there were reports that the Chinese car industry was failing. In 2019 there were 21 million passenger vehicles created in the country whereas 2017 had 24 million cars (These figures are from the German Association of the Automotive Industry).

But as of now the country seems to have come through the Coronavirus and out the other side, its possible to view China car manufacturing as an investment.

It seemed that even without the virus, the Chinese car industry was in a bad way. It seems that car sales in China fell by 92% after that with only 811 vehicles produced per day. Even without the virus we wouldn’t exactly be singing China’s praises as far as the car market is concerned.

Names like Chang-an and Chery Automobiles haven’t fared that well in the Western world, where Japanese cars remain quite popular. In other words The “West” has no problem buying cars made in Japan or South Korea, but not China. The Chinese seem okay buying Western Cars so long as they are made in China, which was the case until Covid shut down several factories.

To look at one name in more detail, Ford’s sales in China fell 20%. Since a factory operating at 80% can only break even, Ford was forced to close factories temporarily.

We don’t really know how much of this is Covid related and how much was already in the works. The closures were treated as longer Lunar New Year holiday. There’s not that much good news at the moment.

The factories were not just manufacturing Chinese cars. In Wuhan there was a Nissan factory (which were founded in Japan) and one for Honda (also Japan) and Hyandai (South Korea). So, by China falling ill, other countries soon felt the pinch.

Maybe by looking into how the US and Japan operate, China can now take the advantage? When the lockdown is over, and people begin to take to their cars out more it will be a rush by all automakers to resume manufacture. China could focus on finding a competitive advantage for their designs.

Areas it might look into is creating lightweight designs with composite materials, possibly personalizing the design. Things must surely change for the Chinese market, there should be a way through. Granted, these times are unprecedented, so no one knows what is coming.

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