By Les Lothringer, ShangHai
Special to Peace and Freedom
July 30, 2006
The Chinese Administration is now well placed with overwhelming FX reserves to pursue strategic asset purchases globally. Rather than commit more funds for domestic wealth creation, they will seek to control sources of production and mining, rather than buy outputs.
By not investing more in China’s internal domestic growth, personal wealth and consumption here will not keep pace with the overwhelming production capacity that China now has built, courtesy of massive foreign investment and know-how which could have been directed to home country capital growth.
As Chinese automobile factory output far exceeds domestic consumption, or the road capacity to soak up that output – and, by the way, the roads in large Chinese cities are already saturated and you save more time, a lot more time by taking the subway – those car factories will send their motor cars offshore for sale to Western buyers.
Superficially compelling they are. Seductive in their bargain basement breaking pricing and ostensibly modern designs, it is an almost irresistible dream come true for families seeking to upgrade to a motorcar they might not otherwise afford.
Yet, like so many products here in China, they are the result of the same production psychology where quality and branding are absent in a culture that competes largely on price alone and uses the tools of “down gauging” and copying to lower production costs – and none too well either.
Chinese motor cars may look similar to certain Western models but the similarities end when one considers engineering design and the structural integrity of that motorcar, as revealed in crash tests conducted in the West. Whereas, say, a Japanese family sized Lexus will maintain passenger compartment integrity, similar looking Chinese marques can experience passenger shell collapse, with both front seat and back seat “occupants” suffering catastrophic injuries. This is true of both sedans and four wheel drivers.
Yet, there is another side to this which is the loss of quality standards enforcement by Western states on whatever is shipped to their borders. The safety advances and standards that evolved over many years are not adequately applied to prevent the import of Chinese cars and motorcycles into Europe and the United States, the UK and Australia.
Consider, say, the electric motorcycle which we are seeing more of in the West, in the desire by consumers towards a lower carbon footprint. Electric motorcycles here may sell for as little as US$130, including a battery that will convey you about 40 miles between charges. But the quality standard cannot be up to Western expectations, not at that price. We see electric bikes like this in the West. Close inspection reveals brake handles with the pivot screw working itself loose, bike frames with lower safe working loads, inferior metallurgy and welds and, overall, a machine with a much shorter “mean time between failure”, an engineer’s way of saying that the machine is going to break down more often and, for a bike, possibly while being ridden.
That these products can be imported cannot be entirely the fault of the Chinese and there remains, as always, no substitute to owning and controlling one’s own factories. The concept of the “virtual factory” or “the virtual brand manager” and contracted outsourcing, as was widely written up in the last ten years or so was always a short-sighted and flawed growth strategy.
Les Lothringer – ShangHai
Tim Johnson covers China for McClatchy Newspapers. On June 26 he wrote a piece on automobile safety for China’s newly minted cars.
“The Brilliance BS6 sedan was hoping to enter the European market this year as a premium-style sedan. But the 40 mph crash test left damage on the automobile that the blogger described as catastrophic.
Most Europeans now won’t be caught, er, dead in one of these vehicles.
Back in 2005, China’s Jiangling Motors tried to market its Landwind SUV in Europe. But sales evaporated after the SUV failed this kind of crash test miserably.