Howes: China IS COMING and why Detroit should be worried

[Variance]

Howes: China IS COMING and why Detroit should be worried

If turnabout is fair play, the Motor City players pouring billions into the booming Chinese market should get set for metal from the Middle Kingdom.

In an auto show press event more akin to diplomatic ceremony than industry unveiling, more a geopolitical statement than one of business strategy, China's Changfeng Group took the wraps off a few not-so-special SUVs Monday and issued a clear statement -- it wants to enter the U.S. market, preferably with an American partner.

Yes, be it a $25,000 Liebao CS6 SUV or a Feibao CT5 pickup from Changfeng, a $10,000 sedan from Geely or a tiny car from Chrysler made by Chery, the Chinese are coming.

The Detroit News

[Northstar]

Why should only Detroit be worried? It seems to me Hyundai and Kia should be worried the most, as the Chinese cars seem to target a similar audience.

[pow]

The only reason why Chinese products are often cheap is, well, because they're cheaply made. Labor costs make up only so much of a car; you don't see Chinese Cadillacs or BMWs going for $19,999.99, do you?

Edited January 9, 2007 by empowah

[AxelTheRed]

Detroit shouldn't be worried. Just saying "Chinese car" aloud makes me wary of any vehicles coming from them.

[balthazar]

Hopefully, chinese cars in the U.S. will quickly be as successful as Yugoslavian cars were.

[aaaantoine]

If they can't meet DOT standards, they won't even make it to market, let alone sell.

Also, this is a very, very, very competitive market. Consider the quality of manufacture and design in a Chinese built car compared to the cars already built for the US. In order to make a sale, the Chinese companies will have to price these cars so low that the consumer will be able to decide between "down payment on Chevy Aveo" and "outright buy Chinese SUV".

[Hudson]

The only reason why Chinese products are often cheap is, well, because they're cheaply made. Labor costs make up only so much of a car; you don't see Chinese Cadillacs or BMWs going for $19,999.99, do you?

I agree that labor is only part of the equation, but Japan and South Korea entered the US market because their labor costs were low enough to overcome shipping and tariff problems and STILL underprice the compeition.

The reason you don't see $20k BMWs and Cadillacs in China is due to other costs. In China, there are tariffs on imported parts. Wholly Chinese vehicles are extremely cheap to build which is why Geely and Chery and others can make inexpensive cars. Brilliance imports quite a few BMW parts and SAIC does the same with Cadillac parts to make those cars. While the local assembly of the 5-Series or CTS is inexpensive, the cost of the imported parts wipe out much of the benefit. If BMWs and Cadillacs were entirely sourced from Chinese plants, they would be less expensive.

As it stands now, a Toyota Prius built in Japan and sold in the US is priced around $22k...the same car built and sold in China runs around $44,000.