Bought the T-shirt and TV? Next for the west are cars ‘Made in China'
The road to Damascus is a strange place to assess the future of one of the world's most important industries. Yet the Syrian capital is the focus of an experiment that has the potential to reshape the automotive business.
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For the past year or so, several Chinese car companies have been shipping vehicles to countries in the Middle East in a trial run for exports. From there, the Chinese are planning an assault on the car markets of the developed world. Chery, the most ambitious, plans to launch five specially developed models in the US in two years' time.
These may be early stages but the Syrian experiment could be the start of an unstoppable shift in the global automotive sector. From T-shirts to televisions, Chinese manufacturers have cut a swath through a number of industries over the past 10 years, as aggressive entrepreneurs harnessed low-cost, hard-working labour. Goods made in China have come to dominate consumer electronics, white goods, furniture and textiles among other sectors.
“Looking at what has happened in other industries: it is clear that the Chinese companies are good at competing on price and cost,” says Sun Jian, a consultant with AT Kearney in Shanghai. “In 10 years, the local carmakers will become strong competitors.”
Those other sectors employ many thousands of people but they pale in comparison with the motor industry, which last year accounted for 4 per cent of US gross domestic product. It is crucial in Germany, where one in seven jobs relies directly or indirectly on the car industry. If Chinese manufacturers can repeat the same low-cost formula that they have used so successfully in consumer electronics, they could prompt the rest of the motor industry to transfer significant parts of its production to China. With popular anxiety about the competitive threat from China on the rise, the prospect of China exporting huge volumes of cheap cars is one to strike fear in many western politicians.
From the start of China's economic liberalisation in the 1980s, the government has had its eye on creating an indigenous car industry. By forcing multinationals to enter the country through joint ventures, Beijing's leadership hoped the Chinese companies would quickly learn the necessary skills. However, progress was slow. Although many local companies made a good living through the joint ventures, their partners let them go only so far. They learnt about manufacturing but they were shut out of the design and research needed to create their own brands.
By 2004, the government was getting frustrated. A new policy document made clear that it wanted local companies to take aggressive steps to develop their own technologies and brands. One industry executive says the big Chinese companies were ordered to hurry up.
The Chinese company that has made the biggest effort to acquire development skills has been Shanghai Automotive Industry Corporation (SAIC). Last year it bought Ssangyong, a South Korean maker of sports utility vehicles, and more recently it tried to take control of Rover, the UK car producer that has since gone bankrupt.
SAIC, which is controlled by the Shanghai city government, could still end up with some important Rover assets. It believes it has acquired exclusive intellectual property rights to two Rover models, although this is disputed by administrators of the failed company. However, the real prize from the deal would have been the engineering teams, car development capabilities and the Rover brand.
SAIC has hired Ricardo, a British engineering consultancy, to conduct research and development. According to people close to the company, Hu Maoyuan, SAIC's long-standing chairman, begins every internal meeting with a pledge to develop the company's own brands.
Geely is one company trying out its wares in Syria. Unlike most of its Chinese rivals, Geely is a private company, which some analysts believe might give it an entrepreneurial edge over its state-owned rivals. Founder Li Shufu, a farmer's son, made his fortune manufacturing motorcycles and has turned his attention to cars. Brilliance China, BMW's new joint venture partner, meanwhile plans to introduce an up-market model into the German market later this year. Brilliance, based in Liaoning province in north-east China, is controlled by the local authority after Yang Rong, its chairman and biggest shareholder, was accused of unspecified “economic crimes” and fled the country.
The company that is really making a stir, however, is Chery. Founded only eight years ago in the poor eastern province of Anhui, Chery gained notoriety with its $3,500 QQ mini a car that General Motors claims is so similar to its own Korean-designed Chevrolet Spark that it is taking legal action against the company in China.
Earlier this year, Chery announced a plan to start selling cars in the US in 2007 with a target of 250,000 vehicles in its first year, reaching 1m within five years. Annual sales of 250,000 would give Chery a market share in the US similar to that of Volkswagen or BMW, according to Goldman Sachs, and account for 10 per cent of all car imports into the US.
To build models especially for the US market, Chery has hired AVI, an Austrian company, to develop the engines and two Italian design companies including Bertone, which has developed cars for Lamborghini and Maserati. It has also contracted a distributor in the US by the name of Malcolm Bricklin, whose previous experience includes bringing the Yugo and the Subaru to the US market.
Chery does not plan to squeeze its way into the market by selling low-margin mini-cars, as other new entrants have done. Instead, it is aiming for the premium end of the market but at prices 30 per cent below those of its rivals. Mr Bricklin believes China's car industry can establish itself in developed markets much more quickly than the 20 years it took the Japanese or the 10 years the South Koreans needed. “Everything is speeded up,” Mr Bricklin says. “Everyone knows everything because all the mistakes have been made before.”
When the Japanese started exporting cars, they had to overcome the country's reputation for unappealing products, as well as the psychological barrier of having been at war with the US only a generation before. “There were so many disadvantages that Japan had that China doesn't have,” says Mr Bricklin, who runs a company called Visionary Vehicles.
There is no shortage of ambition on the part of the Chinese companies. Yet, as they devise their strategies for entering the car markets in rich countries, they face a series of obstacles. Selling cars in the US would require skills in design, branding and marketing that Chinese companies have not yet shown a great aptitude for. “The branding and R&D that you need in these industries are not easy for Chinese companies; it is not where their strengths are,” says Arthur Kroeber, editor of China Economic Quarterly. “I do not have a lot of optimism about Chinese finished goods over the next five to seven years.” Lin Xiaogang, chief executive of Huachen Auto Group, a Chinese car manufacturer, adds: “It is difficult to compete with those companies that have accumulated brand equity over a number of years.”
Quality will be another vital issue. For any newcomer, a failure to produce reliable cars can be fatal. This is especially true for a product that will have a “Made in China” tag, with all the associations of low-cost manufacturing that this carries.
Moving too quickly is risky. While Hyundai is now considered a great success story, Jim Park, an industry consultant, points out that its entry into the US in the early 1990s was plagued with problems about quality. “Hyundai messed it up for other Korean companies for a decade in the US,” he says. “They [the Chinese] will be aggressive, but they need to be careful.” Sun Jian, at AT Kearney, adds: “Whoever is first, if they get it wrong, they hurt their brand and on a larger scale they turn people away from Chinese-made cars.” Mr Bricklin dismisses these concerns. “Cars are going to be coming all over the place from China,” he says. “This [argument] that they are not going to get the quality is just nonsense.”
Finance could be another problem. Developing and marketing new models requires deep pockets. SAIC and Chery can at least rely on strong backing from their respective local governments. Geely, on the other hand, has the problems that all private companies face in China in trying to secure funding. It was recently listed on the Hong Kong stock market but only through the backdoor acquisition of another listed company.
In addition, the Chinese do not yet have the luxury of a secure home market. When Japanese and South Korean companies began developing their own models, they could rely on having a large chunk of their domestic market for a long period, which both guaranteed a reasonable flow of revenues and gave them some space for trial and error. The Chinese companies are trying to introduce their models into a domestic market that will soon be populated by every big multinational carmaker and that the former head of Volkswagen in China recently called “the most competitive market in the world”.
The multinationals are also not going to let the Chinese wander in unhindered. In an indication of the response they can expect, GM said last month it would try to prevent Chery from registering a trademark in the US on the grounds that its brand was too similar to Chevy, the nickname for GM's Chevrolet brand.
Advisers to Geely say that, when it tried to buy a specialised machine tool used to make gearboxes, the company took more than a year to find a supplier willing to sell to it a delay they put down to pressure on the machinemaker from multinationals.
Nor is it yet much cheaper to produce cars in China. Although assembly line workers at Daimler-Chrysler's Chinese factories earn $1.95 an hour, compared with $49.50 at its German plants and $36.50 in the US, labour is only a small part of the overall cost. Many components have to be imported, the factories are sub-scale and logistics can be inefficient in China. “Even today, many of the components used in passenger cars are priced above world market levels,” says Jack Perkowski, the American founder and chief executive of Asimco, a Chinese parts maker. As factories grow and local parts prices drop, the cost of Chinese vehicles will also fall, but this will take time.
There are plenty of reasons, therefore, why the Chinese companies might stumble. However, if they succeed, it could force the automotive industry into a big rethink. Every one of the world's biggest car companies has been plunging investment into China in recent years with an eye to supplying the country's growing middle class. As yet, only Honda has set up a plant to make cars specifically for the export market. But as costs in China fall as a result of rising volumes and economies of scale, the other companies will begin to think much harder about using China as an export base.
The political consequences of this are not hard to predict. When DaimlerChrysler raised the prospect last month of exporting cars from China to the US to sell under its Chrysler badge, American unions reacted angrily and Chrysler was forced into a rapid retraction. “Anyone who is familiar with the union situation and the political situation here will tell you there will be a backlash,” one Chrysler official said.
The US is already talking tough about China's currency and its exports of textiles. In a recent article called “The end of the love affair with China”, Jonathan Anderson, a UBS economist, described how the developed world had moved in recent months from admiration at China's economic advances to trepidation at the competitive threat. If China were to start taking big chunks of the car markets in rich countries, any romance would truly be over.
中国汽车“声东击西”
拿通往大马士革的公路来评估未来全球最重要的产业之一有点奇怪。但这个叙利亚首都却是一次试验的焦点，而这次试验有可能重塑汽车业。
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在过去一年左右的时间里，数家中国汽车企业向中东国家输出汽车，以此试验汽车出口。中国厂商计划从这里起步，打入发达国家的汽车市场。最具野心的奇瑞(Chery)，计划两年后在美国推出5款专门开发的车型。
目前或许还处在早期阶段，但全球汽车产业将不可遏止地出现转变，在叙利亚的试验可能只是个开头。最初迹象来自上海汽车工业(集团)总公司(Shanghai Automotive Industry Corporation)，该公司最近曾试图控股MG罗孚汽车(MG Rover)，去年还收购了韩国的运动型多功能车制造商双龙(Ssangyong)。
过去10年里，由于大胆进取的企业家利用了廉价又勤劳的劳动力资源，中国制造商横扫从T恤衫到电视机的大量产业。中国制造的产品逐渐主导了消费电子产品、白色家电、家具和纺织品等领域。
“看看其它产业领域所发生的一切：很明显，中国企业擅长在价格和成本上竞争，”科尔尼(AT Kearney)上海咨询师孙健说，“10年后，中国汽车制造商将成为强有力的竞争者。”
其它产业也雇用成千上万员工，但不能与汽车业相比。去年，汽车业占美国国内生产总值的4%。该产业对德国亦至关重要，每7个德国工作岗位中，就有一个直接或间接依赖汽车业。中国制造商已在电子消费品领域成功运用低成本模式，如果他们能复制这一模式，会促使世界汽车产业将很大一部分生产转移到中国。随着人们日益担忧来自中国的竞争威胁，中国出口大量廉价汽车这一前景令许多西方政客惊恐。
80年代中国启动经济自由化伊始，政府就着眼于创建本土汽车产业。通过迫使跨国企业以合资形式进入中国，中国领导层希望，中国企业能很快学到必要的技术。然而，学习进度缓慢。尽管许多本土企业通过合资经营得不错，但它们的合资方终究有所保留。中国企业学到了制造工艺，但在开创自主品牌必需的设计和研究方面，它们被拒之门外。
到2004年，中国政府开始不耐烦。一份新政策文件阐明，中国政府要求本土企业积极进取，发展自主技术和品牌。一位业内高管说，大型中国汽车企业被责令加快步伐。
上海市政府控股的上汽在获取开发技术方面最不遗余力。事实上，上汽最终仍可能收购罗孚的一些关键资产。上汽认为它已获得罗孚两款车型的独家知识产权，尽管英国罗孚的破产接管方对此有异议。
最初被提议的交易的真正价值，应该是工程团队、汽车开发能力和罗孚品牌。上汽已聘请英国工程咨询公司里卡多(Ricardo)进行研发。知情人士表示，长期担任上汽董事长的胡茂元在每次内部会议开始时，都誓言开发公司自主品牌。
吉利(Geely)是到叙利亚去试水的公司之一。同大多数中国竞争对手不一样的是，吉利是一家私营企业。一些分析师认为，相对于国有竞争对手，这可能会使吉利更具一种开拓进取的优势。创始人李书福是一位农民的儿子，通过生产摩托车成功，并把注意力转到了轿车上。同时，宝马(BMW)新的合资伙伴华晨(Brilliance China)计划今年晚些时候在德国市场推出一款高档车型。总部位于中国东北辽宁的华晨现由当地政府控制，此前，华晨董事长兼最大股东仰融因涉嫌未指名的“经济犯罪”而遭到指控，并逃离了中国。
不过，真正在市场上大展身手的是奇瑞(Chery)。奇瑞是在华东贫穷省份安徽成立仅8年的一家公司，因其3500美元的QQ迷你车而声名远扬，通用汽车(General Motors)称这款车与其自有车型――韩国设计的雪佛兰斯帕克(Chevrolet Spark)极为相似，目前在中国与奇瑞打官司。
今年早些时候，奇瑞宣布计划2007年开始在美国销售轿车，目标是第一年销售25万辆，5年内达到100万辆。据高盛(Goldman Sachs)表示，25万辆的年销量将使奇瑞在美国的市场份额接近大众(Volkswagen)和宝马，并占美国所有进口轿车的10%。
为给美国市场特别设计车型，奇瑞已聘请了奥地利AVI公司开发引擎，还聘请了两家意大利设计公司，包括为兰博基尼(Lamborghini)和玛莎拉蒂(Maserati)开发过轿车的博通(Bertone)公司。它还在美国与经销商马尔科姆?布里克林(Malcolm Bricklin)签定合同，布里克林曾将Yugo和Subaru引入美国市场。
奇瑞并不打算像其它新进入者那样，通过销售低利润率的微型车切入美国市场。相反，它的目标是高端市场，但价格要比它的对手低30%。布里克林先生相信，中国汽车业在发达市场站稳脚跟将比日本所花的20年和韩国所需的10年快得多。“一切都在加速，”布里克林先生说，“大家都了解所有事情，因为所有错误以前都已犯过。”
