China auto after Detroit
Filed under:-guest-posts | Tags:auto, China, economy
Add comments
http://online.wsj.com/article/SB124761586630042303.html
Random thoughts.
* With the recent bad quality problems of Chinese products, China really cannot establish a name brand outside China – at least for a while. It is a good way to buy a brand name.
* Cost too much to build dealerships in foreign countries and learning international marketing and laws. It is a good and cost effective way. They are many former US dealers begging for dealership with ample of cheap retail space.
* China still lacks a lot of expertise in top auto technologies such as engine, transmission and environmental control devices. All these can be transferred from Volvo. A win-win situation.
* With China’s (or the company’s) reserve, it is a timely bargain that will return better than most of the past foreign investments, let alone the US treasuries.
* Why China will succeed in this deal?
– The $25 or so (with exception of Mexico) hourly wage cannot compete with $1 hourly wage else where.
– The huge and growing market of China itself.
– The Chinese engineering graduates are no dummies. They’re so dedicated and they work longer hours than most in the west. 12 hour work for one engineer actually equates to 16 hour work of the counterpart in the west working 8 hours when you consider coffee breaks, socializing in the office, holidays, vacations…
* It is the major part of the auto market. Electric cars from another Chinese company is a very small part of today’s auto market. I was a little surprised they did not bid on some division of GM like Pontiac.
* Volvo is a good and reliable car, but on the more expensive side. My friend after surviving from a could be fatal accident with a Volvo is buying Volvo cars for life.
Hope it will not go to Germany way to build cars so sophisticated that it is a big problem to own one in US with expensive parts and unqualified technicians.
There are currently no comments highlighted.
July 16th, 2009 at 8:32 am
There is no way that Chinese automakers will be any threat to the Munich’s/Ingolstadt’s/Stuttgart’s of the automotive world in the foreseeable future. I just don’t see China competing in the prestige market any time soon.
And even on the next tier, China is not positioned well against the Honda’s and Toyota’s either, who have spent decades cultivating the impression of quality and reliability, if not necessarily fully servicing the desires for primal driving pleasure. I suppose Volvo might give China some street cred in this echelon.
But ultimately, I think China might follow the path that Hyundai and Kia blazed 20 years ago, by starting out as the ultra-econo alternative. With time, and an earned reputation, even companies like that can start to move up-market, as Hyundai is attempting to do recently.
July 16th, 2009 at 8:44 am
@ TonyP4: I’m with you on most of this but I wanted to correct one part that I think is misunderstood in the west:
“- The Chinese engineering graduates are no dummies. They’re so dedicated and they work longer hours than most in the west. 12 hour work for one engineer actually equates to 16 hour work of the counterpart in the west working 8 hours when you consider coffee breaks, socializing in the office, holidays, vacations…”
Actually, it’s just the opposite. I saw this pattern in Taiwan, Korea and China. When people work 12 hour days, they actually slow down to pace themselves to get through such a long time period. The efficiency level is lower. They used to always tell me that they worked hard but I worked smart and could get a lot more done in the same amount of time as they could. I think this was specifically because of the pacing they put themselves through, along with the demand for consensus decisions that tend to take far more time to decide.
I’ve never worked in an office in the States where most people went home after 8 hours. Most worked ten hours per day and this is even more evident lately with the slower economy. I have had many Chinese engineers remark that they were surprised how hard Americans work and how impressed they were. Now, this might be somewhat regional since I live in San Diego but I’ve heard this time and time again and noticed it myself when living in Asia and comparing the work habits of both cultures.
I tried to get our employees in Asia to work shorter hours but the custom there is that no one leaves until after the boss does. Once the boss leaves, the office empties out in a few minutes.
July 16th, 2009 at 12:45 pm
@#1 SK.
I’m pretty agree with you. However, I think it will not take more than 10 years from today to reach Korean’s level if China plays the card right like buying Volvo. Japan is still ahead of Korean in certain auto technologies, but the price difference makes Korean cars very competitive.
Actually there is a technology plateau. When we reach there, the return is diminishing. Some Germany cars cannot be serviced effectively due to the advanced features. Japanese cars are not reliable as before: no more indestructable Prelude… Is it due to ‘assemble in China’ or Japs learning from American that you need your customer to buy a new one sooner?
As mentioned, 4 important factors favoring China: 1. mass internal market. 2. huge talent pool to draw from. 3. dedicated engineers / workers. 4. cheap wages.
@#2 Steve.
Agree with you partly. However, I should emphasize the word dedication. When you’re working 12 hours a day and you’re actually enjoying it, your productivity raises to another level. It is like ‘mad scientists’. The west will not allow engineers to live in a dorm environment as some engineers in China do.
My old company uses to emphasize ‘work smart play smart’ (some top managers must have taken some management seminar). I can see my co-workers are getting lazier instead. It is lack of dedication.
July 16th, 2009 at 2:26 pm
@ TonyP4: Ha ha, your ‘mad scientist’ quote reminds me of IT guys who work all hours of the day and night and then crash for a few hours before they start up again. They’ve made Starbucks rich!
Tony, it’s an interesting point you raise because I’ve been fortunate enough to travel around the country working with different geographical areas and there is a definite correlation between the region and the productivity. Typically the regions that work the hardest are Texas, Minnesota and California. I can’t speak for New England and the middle states because I haven’t worked there for a very long time, but from central to west, those three states have a noticeably stronger work ethic. I have no idea why.
July 16th, 2009 at 3:30 pm
@Tony
‘work smart play smart’ does not mean lack of dedication. Dedication and working hard comes from one’s work ethic it truly depends on the individual. Having dedication does not mean you work long hours either. The way I see it, if I follow process, make sure my end result has good quality and I deliver on time, that is working smart. That is my dedication to my job. I finish on time and do not work over time does not mean I don’t work hard, it just means I found a way to finish this quicker.
There is this woman engineer that I used to work with and I admit she works her butt off to get things done. But she insist on doing things her way and her way only. So even if she creates more work for other people, it is ok with her. If we can’t deliver certain documents on time, she does not take responsibility for creating more work for other people, she just throws them under the bus. If we have a better way to do things, she refuses to listen or take suggestions. If you were a manager, would you hire someone like that? or would you hire someone who always finish stuff up on time and rarely works overtime?
July 16th, 2009 at 5:03 pm
Hi Steve, that may be the reason for the high divorce rate of ITers in China (could be same for US). When folks marry to their jobs, their spouses become neglected or are encouraged to seek other relationship. However, it is good to control population and ‘recycle’ the females to adjust the imbalance between sexes in China. 🙂
Hi miaka, it really depends on the work force. Most folks at the phone company and government agencies are not too dedicated especially the ones unionized. Same for the old communist China, who would be dedicated when the reward is the same?
They just follow the top management for their own benefits. The top management slogan was ‘creating a world class company’. However, I was not allowed to travel first class or stay in the first class hotel. I worked hard, but not played hard. 🙁
July 16th, 2009 at 8:48 pm
China has one thing going for it that Japan and South Korea didn’t: its own domestic market. It’s quite conceivable for a Chinese auto marker to be a formidable one without a large present in the North American and West European markets, kind of like Huawei and ZTE in telecom.
The top auto producing nations all have long history of auto making. It takes a long long time to have the whole ecosystem ready to be a top auto nation. In that sense China will not be easily overtaking them probably in decades, with one caveat. What if the whole internal combustion engine automobiles are near their end? Then a leapfrogging technology such as electrical vehicle may enable China to be the technological leader.
One piece of news kind of caught my eyes recently was that China is now seriously considering committing to a carbon emission reduction, if the developed nations commit to a larger reduction — based on the 1990 levels nevertheless. If you look at the per capita carbon emission level, this hardly seems fair. Chinese policy makers are all engineers who should have no problem of seeing through the flimsiness of climate changing (no longer global warming) models/theories. Even they are somehow duped, wouldn’t a fairer deal be at least matching at a per capita level?
Is it a sign of their collective belief that technologically the carbon-based energy ecosystem is about to take some drastic changes? But I could be over-reading it…
July 20th, 2009 at 5:02 pm
@ JXie #7: It’d be nice if the internal combustion engine were on its last legs, but unfortunately it seems it’ll be awhile before another technology can match it. Right now, nothing delivers as much energy per volume as petroleum derived products. From what I’ve seen, the most viable near term technology would be hybrids that use gasoline engines similar to a lawnmower, which can recharge the batteries without having to plug them in at night. This technology only becomes truly feasible when battery technology becomes more efficient than it currently is, but that’s just a matter of time. If cars could get 120 MPG, the emissions problem would be greatly reduced. What I’d personally like to see is, instead of minimum MPG standards, a new standard that would use a horsepower/weight ratio. Today’s Honda Accord goes from 0-60 MPG faster than a 1960 Corvette. There is no reason for autos to have that kind of acceleration, and horsepower reduces mileage substantially.
The problem with negotiating per capita carbon emissions is that it rewards overpopulation, and pollution is affected more by that cause than any other. You could just as easily say that it should be a square kilometer carbon emission standard, but that would make places like Singapore unable to meet the standard no matter how stringent their rules. There’s no easy “one size fits all” standard, so I’d guess the final negotiation will be based on a combination of several data points.
Be careful about the climate change debate. I sold instrumentation that was used to study climate change historically, and the data isn’t in dispute scientifically, just politically. The scientist who makes the political argument against global climate change has as much credibility in the scientific community as the doctor that endorses little tablets that will cause you to lose massive amounts of weight. In fact, most of the “scientists” that argue against global climate change don’t even work in that specific field but in other unrelated fields.
The “politics” on the global climate change side is when people such as Al Gore present accurate data but then take conjecture on what that data means and try to pass it as scientific certainty. The earth is one giant “closed loop” system with the exception of sunspots and the gravitational effect of the moon. Closed temperature loops are the toughest processes to control; I sold advanced temperature instrumentation for years so I’m very familiar with the problems involved. Trying to simplify the effects is pure politics, but denying the effects is no different.
July 20th, 2009 at 11:23 pm
Hi JXie and Steve,
Alternate energy (and electric cars) is the solution when a barrel of oil is $140, not so at $35, and now OK at $65. That’s where the government should come in to encourage alternate energy solutions and iron out the oil price fluctuations.
GM is always betting in the wrong side.
Oil at $65 is financially better than any other source of energy. Hybrid requiring two drive trains and only saves more energy economically in city driving. The distance before a new charge is a problem for battery. However, my new laptop can last over 3 hours (vs 1 hour a few years ago). It shows we’re making progress.
China’s new electric car is about the same technology developed at MIT and expect to sell at least 1/3 off than the American counter part. That company is full of dedicated engineers – those who work long-hour, live in a dorm-like environment, and really enjoy their work.
July 21st, 2009 at 12:09 am
@ TonyP4: Which Chinese company is manufacturing the all electric car? My worry about those cars is that the electricity to charge them will come from coal fired power plants so the pollution will still be there, albeit in a different form.
July 21st, 2009 at 4:27 am
@Steve #8
At the risk of getting too technical,
The famous hockey stick graph Al Gore presented was solely based on MBH98, which Mann el al. probably regret it as of 2009. The problem isn’t about the measured data of the proxies, but rather how to interpret the data and reconstruct the historical climate data. It’s much harder than you let on. There are enough climatologists and palaeoclimatologists stand at the other side — at least doubting the certainty of some popular climate models. To me there are a few things really bugging me:
* The prediction of the global temperature of the past several years, by the same climate models, have been spectacularly wrong.
* There were periods (10s to 100s of millions years ago) based on the restructured proxy data (far less accurate) when the earth was many degree cooler, and the carbon content in the atmosphere were several times and sometimes ten plus times higher. So there are very likely some much larger factors in play.
Anyway, I kind of not sure what is the point of statements such as “the scientist who makes the political argument against global climate change has as much credibility in the scientific community as the doctor that endorses little tablets that will cause you to lose massive amounts of weight.” I am more comfortable reading what literally they write than making judgments on their credibility.
July 21st, 2009 at 4:36 am
See http://money.cnn.com/2009/04/13/technology/gunther_electric.fortune/. The company is BYD. The reported specs of its E6 are eye-popping.
Centrally burning hydrocarbons in power plants itself is more energy efficient, and less polluted. Granted the loss in power distribution and energy transfer probably makes it overall less energy efficient. But the beauty is, there are more electricity sources than hydrocarbons.
BTW, the fastest electrical car can go from 0 to 60 mph in 3.6 seconds last time I checked.
July 21st, 2009 at 12:24 pm
Steve, it is BYD as mentioned by JXie. I believe they’re in S. China. I read several articles about them including the one posted by JXie. It caught my attention when Buffett invested in this company (it is not listed in US exchanges).
As stated before, electric cars are limited by the range to recharge. Eventually free charge meters will be available in every city corner to make it at least usable inside cities.
Going from 0 to 60 mph in n seconds is only a good measurement for racers and the ones pretended to be. It is electric, so it is in full speed at the turn of a switch.
July 21st, 2009 at 5:03 pm
@ TonyP4: Electric cars have the same horsepower to weight limitations as gasoline powered cars, it’s just that the charge rather than the refill comes sooner. It’s the efficiency of acceleration and how it affects the charge that matters. That’s why I like the idea of a very small gasoline engine to keep the batteries charged rather than an all electric car. I wouldn’t want to buy a vehicle that was limited by distance or that I had to wait for a reasonably long time to quick charge at a station.
@ JXie: Thanks for the information on BYD. I certainly agree with you that the electric or electric hybrid car is the ticket for China to be able to catch up to foreign competitors in the auto industry and become a real player. Not only will it allow China to develop a major industry, but it will also bring technological advances to the entire world in terms of more efficient use of energy, which helps everyone.
Don’t worry, you can get as technical as you want. The two things that are bugging you are both very valid points and have also bugged me because they were both simplistic explanations for a very complex phenomena.
* The prediction of the global temperature of the past several years, by the same climate models, have been spectacularly wrong.
I laughed when I first saw those predictions because I’ve worked in temperature on a practical scale for too long and knew better than to believe anyone could predict climate models in any specific manner. I used to sell for both Taylor Instruments and Foxboro Instruments (two huge process control manufacturers) in my past, so I have a practical understanding of temperature control, not some theoretical computer programs put together inside a university. So many different agents play a part in temperature cycles that there is no way you can predict anything accurately. For instance, if enough of the Arctic glacial ice melts, the interaction with the Gulf Stream could shut it down and cause a mini-Ice Age in Northern Europe and New England. Will that happen? No one really knows because it’s speculation. Scientists think that the melting of the glaciers in the Himalayas are from wood burning fires in both India and China, yet this is also speculation. All they really know is that glacial melting is real.
I believe the “global warming” scare was all about certain interest groups wanting to effect change and simplifying the problem to create support for their change. In the end, it hurt their cause more than admitting what they didn’t know because now many doubt there is any problem with climate change.
* There were periods (10s to 100s of millions years ago) based on the restructured proxy data (far less accurate) when the earth was many degree cooler, and the carbon content in the atmosphere were several times and sometimes ten plus times higher. So there are very likely some much larger factors in play.
I’ve seen the direct data from analysis of the ice core samples taken from Antarctica and Greenland, done at Scripps Oceanographic Institute in San Diego. The spikes in methane, propane and a few of the other gases are not only the highest they’ve ever been in recorded history, they are more than twice as high and anything previously recorded. We are in uncharted territory. What we do know is that changes in one part of the world can affect another part of the world in a drastic way; for instance, the year that had no summer in New England (1816) was caused mostly by a volcanic eruption in Indonesia. Volcanic ash caused 30 degree morning temperatures in New England during that summer. That was a natural phenomenon and because it was natural its life was short lived. But today’s spikes are not natural nor are they short lived. Human population and the pollution it brings continues to increase. Pollution levels have not topped out. Temperature undergoes a lag effect so changes that occur today won’t change the weather for many years in the future.
Where we differ is that there are not enough climatologists on the other side, and the data I read of theirs is even more simpleminded than the stuff coming from Al Gore. They haven’t made a valid argument in my mind at all. Maybe for you it’s different but I’m not convinced. The latest argument I’ve heard is the “sunspot” theory which ignores everything except sunspot activity and tries to explain away the data as a short lived cycle, even though the data doesn’t match the sunspot activity. I see those more as political arguments than scientific ones, just as the “global warming” argument was a political argument and also not scientific.
Wow, we’re completely off topic! 🙂
July 21st, 2009 at 11:12 pm
Steve,
I’ve seen the direct data from analysis of the ice core samples taken from Antarctica and Greenland, done at Scripps Oceanographic Institute in San Diego. The spikes in methane, propane and a few of the other gases are not only the highest they’ve ever been in recorded history, they are more than twice as high and anything previously recorded.
With the measurements of the air trapped in the ice cores, it’s fairly certain that the carbon content in the atmosphere now is the highest since the beginning of last glacial period, which was some 100,000 years ago. It’s far from certain that now it’s the warmest period in the recorded human history, let alone in the last 100,000 years. Casual evidents are such as that Greenland was somewhat green in the Medieval Warming Period, and Romans planted grapes in England without today’s agricultural technologies.
To me the key is keeping an open mind, and don’t get religious over this.
Anything beyond the last glacial period, we don’t have accurate measurements. However, based on some proxy data, it’s reasonably certain that at at least quite a few points in the last several hundreds of millions years (compared to 100,000 years), carbon content in the atmosphere was much higher and the global temperature was much lower.
Go back to the topic in hand, electric cars. E6’s specs are, 250 mile per full charge (with 5 adult passengers), and a 10-minute quick charge can get 50% charged. Assuming the specs can be improved overtime, this is pretty much the game changer if you ask me.
July 21st, 2009 at 11:43 pm
@ JXie: We’re not disagreeing on this. I never said a thing about “global warming” except that it was a canard, so I’m not sure why you brought that up. I was talking about climate change and the unpredictability of it all. The ice core samples in Antarctica that were being analyzed using my instrumentation were around 400,000 years old, so they can go back a lot further than 100,000 years. How accurate is the dating? I wouldn’t think they could get it super accurate at those distant dates but the general trends are there to see.
I think that denying the data is the sign of a closed mind, so we disagree there. From what I saw, it was pretty convincing. All the scientists working on the project believed man was affecting climate change in a big way, so I wasn’t alone in my opinion.
Those numbers you mentioned for electric cars are great, but there is still the problem of where to get the power to charge the cars. If it’s created using China’s high sulfur coal, how would that compare with using a small gasoline engine to keep the batteries charged? New technology might solve this but right now, I think the jury’s still out on which one is the most effective and especially, which one can be implemented the fastest.
Cutting down on imported petroleum usage is also a geopolitical benefit, not just an energy or financial one. It makes sense for both China and the States to move towards much lower petroleum consumption in terms of national security.
July 22nd, 2009 at 1:18 am
Steve, not sure if you get the gist of what are being contended. This is kind of straight forward if you really think about it. Regional measurements (from ice cores) are good enough as proxies for the global air composition, but far from enough for the global temperature. For instance, even if we accept that Greenland in the Medieval time might be warmer than today, but it doesn’t necessarily mean that globally it was warmer because other regions could be colder — to the point of compensating the warmth in Greenland/Europe. To construct a reasonably accurate picture of historical global temperature, you will need many proxies including measurements from ice cores, lake sediment, etc. from all over the world. The charts from many of those proxies show that the Medieval Warming Period was warmer than today, but it’s still not conclusive globally. MBH98 though is a joke.
Get back to electric cars. For instance, 80% of France’s electricity production comes from nuclear. If you swap out internal combustion engine cars with electric cars, this is the country that may not need a drop of oil, or a piece of coal, at least for energy. This CAN be the future — much less hydrocarbon burning, but a lot of other energy sources.
July 22nd, 2009 at 1:44 am
@ JXie: Yes, France would be a perfect place for electric cars! I completely agree with you.
We’re missing each other on the ice argument. I still can’t figure out why you keep talking about temperature. I was talking about atmospheric composition and climate change. Change doesn’t mean warming, it means change. It can mean temperature, storm activity, snow, rainfall patterns, etc. Any one of those could be catastrophic for millions of people. Part of the overpopulation problem is that there is less room for adjustment to change because resources are so stretched.
July 22nd, 2009 at 2:24 am
Cool.
At its peak, there were probably more than 100 million people in Ming. Then the Little Ice Age hit, and agricultural yield decreased. All the rest was like playbook that had repeated many times in the past. Famines, peasant revolving, and finally the whole nation fell. When it was said and done, there were fewer than 50 million people left when Qing finally controlled all the land.
The deepest drop between peak and trough? In Han the population peaked at 50 million, and within a hundred years, in the Three Kingdom period, it was believed there was fewer than 10 million.
The overpopulation problem? It will be corrected by nature… Philosophically I just can’t handle the hubris that we can actually control the global climate.
July 22nd, 2009 at 7:53 am
@Steve, JXie: I was a bit surprised to read this debate about global warming, but it might be a case of different opinions in different countries (and I’m not saying anything in particular as to who’s right). This is a link to a Gallup poll about opinions on global warming in the world:
http://www.gallup.com/poll/117772/Awareness-Opinions-Global-Warming-Vary-Worldwide.aspx
In the US, while 97% know about the concept, around 49% of these believed global warming is caused by humans. This is lower than many European countries, though surprisingly an even lower number of Icelanders believe it’s caused by humans.
I don’t doubt global warming, but I tend to object when people say that particularly hot weather this summer, or this particular cyclone, or whatever, is an example of global warming. It should be statistical rather than based on individual cases.
July 22nd, 2009 at 8:41 am
Wukailong, general warming trend in the last several centuries since the Little Ice Age, and the roughly 0.6C increase in global temperature in the last century, definitely yes. But the hockey stick graph, i.e. we are in the warmest period in the last 100,000+ years, I highly doubt that. Do I believe the recent warming trend is mostly man-made? No — at least not sure. The causality between carbon in the atmosphere and the recent warming trend, to me is quite probably much weaker than many believe.