The Chinese economy has been growing at an incredibly fast pace for about three decades now, after a series of reforms were carried out in the late 1980s. China has opened its doors to foreign investments, liberalized foreign trade, and made significant efforts to educate its workforce, which has resulted in an enormous industrial expansion. The automotive industry has been one of the key sectors driving Chinese economic growth, especially during the last decade. In fact, it has grown so much recently, that it has started to threaten the global auto industry.
American car makers should be particularly concerned, as China intends to export large quantities of vehicles to the United States in future. Although Chinese cars are definitely not as good as American cars, as far as quality, performance and safety is concerned, there are other factors that could make them a strong competitive force in the near future.
Chinese auto industry has been highly productive for the last 5-6 years, and it is now the world’s largest auto producer. In 2009, it overcame the United States to become the world’s largest vehicle producer, with 13.8 million units. In 2012, a total of 19.27 million vehicles were produced in China, and now, about 25% of all the cars produced in the world are made in China. It expects to make about 40 million vehicles annually by 2015. In addition to this, China is also the world’s largest vehicle market, after it surpassed the U.S. in 2009.
Vehicles made in China used to have questionable quality and poor safety performance, and most of them were basically copies of popular models made abroad. But now, the quality of their cars is fairly acceptable, and Chinese car manufacturers are putting much more efforts into improving vehicle safety, as well. However, safety standards in China are still lower than in the United States, and we are yet to see a Chinese car that offers similar performance to the vehicles made by the likes of GM, Ford or Chrysler.
However, there is one factor that gives the Chinese auto industry a significant competitive advantage over the United States. It’s the price of their vehicles. Cars, like almost all other products, that are produced in China, are much cheaper than American cars. Low-cost Chinese labor is one of the factors that help Chinese car makers produce affordable vehicles.
Additionally, Chinese automakers often use low-cost materials in their vehicles, and frequently don’t invest in modern, sophisticated design. They also save a lot of money by doing far less crash tests than car makers from other parts of the world. Crash tests are a significant expense for every car manufacturer, and Chinese companies conduct about 40% less tests than most global car makers. All this allows the likes of Geely, BYD, Great Wall, Lifan, or Hafei, sell cars for $6,000 – $7,000, which is almost half the price of some of the cheapest cars made in America.
To sum up, while it’s clear that the quality of Chinese cars doesn’t stack up against American cars, their affordability makes them quite appealing and it can help the Chinese auto industry become a serious competitor to the United States.
Jordan Perch is an automotive fanatic and “safe driving” specialist. He is a writer for DMV.com, which is a collaborative community designed to help ease the stress and annoyance of “dealing with the DMV”.
