Automotive Competition: Is China the Next Japan? (GM, F, TM, HMC)
By Evelyn Rubin on Douglas McIntyre
Douglas McIntyre submits: Chinese automotive manufacturers Geely (in photo) and Chery have begun to show their cars at the auto shows and are starting to make the rounds of U.S. dealers. According to MSNBC, Malcolm Bricklin, who helped Subaru and Yugo get footholds in America, is working with Chery to line up retail outlets.
No one seems worried. Maybe the American automotive industry should not be. Maybe the Chinese automotive threat is still too far off.
The Chinese automotive industry is growing at an astonishing pace. According to the People’s Daily, in February, China produced over 528,000 cars and sold 480,000. The Chinese Ministry of Commerce says both figures are increases of more than 50% over the same period a year earlier.
Granted, General Motors Corp. (NYSE: GM), Ford Motor (NYSE: F), Toyota Motor Corp. (NYSE: TM), Honda Motor Co. Ltd. (NYSE: HMC) and others are doing well in China along side the local manufacturers. And, they should. In the U.S. there are more cars that households. In China, there is still only about one vehicle for every 100 households.
The demand for cars and light trucks in China over the next decade will drive down production costs and raise unit sales in a way the industry has not seen since the early part of the 20th Century in the U.S.
It would be foolish to think that the Chinese will not be aggressive exporters as their manufacturing cost efficiencies rise with unit sales.
It’s a good bet that U.S. consumers will be driving Chinese-made cars in the next two or three years. The question is, will these new models go the way of the Yugo, or will they take share the way Subaru and others have?
Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He has also been president of Switchboard.com, which was at the time the 10th most visited site on the web, according to MediaMetrix. He has also been on the boards of TheStreet.com and Edgar Online.