China Car Makers Cut Corners to Success

As the presence of cars in China grows, foreign automakers have tried to tap into the market’s increasing demand. Despite the recent slump in auto sales as consumers wait for discounts, Chinese automakers are cutting corners to achieve success. From Reuters:

Paring back on crash tests, skimping on frills, simplifying designs, using cheaper materials and, in a departure for the industry, outsourcing most of their design and engineering are having a profound effect on the cost bases of China’s dozens of car makers. Some are now able to sell cheap and cheerful small cars for about 40,000 yuan ($6,350) – less than half the price of a plain vanilla Toyota.

Models such as the Panda and the Great Wall Haval H3 are becoming popular not only in China but increasingly so in emerging markets, from Indonesia to Egypt and Ukraine. They are driving China’s auto exports to record levels, even as growth in China’s auto market slows down.

Exports of Chinese-produced vehicles are forecast by China’s auto association to hit one million vehicles this year from 849,500 vehicles last year. Some automotive analysts are predicting a 50 percent increase to 1.25 million vehicles.

Chinese car makers tended to sift through a foreign vehicle to identify expensive, non-critical features and functions to skimp on or eliminate, such as a door that closes with a proper “thump,” as well as power windows and passenger-airbags. The result was often dubious quality and durability. After a few years of use, bumpers and door handles would start falling off.

China’s safety protocol does not require a certain number of crash tests for domestically produced cars, which results in the lasting popularity of foreign cars among consumers. While Japanese car makers, such as Nissan, have experienced a dip in sales due to the dispute over the Diaoyu Islands and Anti-Japan Protests, other automakers have been reporting profits in the Chinese market. According to Yonhap News, Kia Motors, a South Korean automaker, ranks 7th in China’s market:

Kia Motors Corp., South Korea’s second-largest automaker, ranked 7th in China’s auto market with a market share of 3.1 percent, company officials said Tuesday.

Kia Motors said it sold 289,817 vehicles in China during the January-August period, up 12.7 percent from 257,158 in the same period last year.

Kia’s larger affiliate, Hyundai Motor Co., was the No. 5 player in the Chinese car market by selling 511,960 vehicles with a share of 5.5 percent.

Market analysts expect Kia Motors to continue to boost its presence in China. “Despite concerns about further slowdown in the Chinese auto industry, a visit to Kia’s China operations renewed our confidence in its ability to gain market share,” said James Yoon, an analyst at BNP Paribas.

September 18, 2012 9:19 AM
Posted By: