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'Good enough' cars at $7K each keeps Chinese consumers happy

By Catholic Online (NEWS CONSORTIUM)
September 18th, 2012
Catholic Online (www.catholic.org)

While leading the world in electronics, China has never really been noted for its automotive industry. Many Chinese drivers would refuse to buy cars made within the country, due to their being poorly made and unsafe. Now - after cutting some corners and some mechanical improvement, Chinese cars such as the Panda, which sell for less than $7,000, are being snatched up and bought by consumers.

LOS ANGELES, CA (Catholic Online) - Chinese car makers are thrifty to a fault. For example: the Zhejiang Geely Holding Group Co. conducts 20 to 25 crash tests when it developed its Panda model. Other car makers typically conduct 125 to 150 crash tests for each new model.

Chinese car makers also outsource most of their design and engineering. Cheap and cheerful small cars - termed "good enough" to drive, sell for as low as $6,350, less than half the price of a plain Toyota.

Despite their plain and frumpy looks, some indigenous models are striking a balance between no-frills affordability and acceptable quality. This development has potentially significant implications for the world auto industry.

Such cars as the Panda and the Great Wall Haval H3 are becoming popular not only in China but increasingly so in emerging markets. Indonesia, Egypt and Ukraine are all nations that are happy to welcome these new vehicles. These very economical autos are sending the Chinese automotive industry to record levels, even as growth in China's auto market slows down. Some automotive analysts are predicting a 50 percent increase to 1.25 million vehicles.

These "good-enough" cars pose a serious challenge to the way the international industry operates.

"This is a warning shot to the established engineers who have told their management time and time and again that this is the minimum cost they can achieve with their existing design and production methodology," Shiro Nakamura, a top Nissan Motor Co. executive and the company's chief designer says. "Now the Chinese are saying they can cut another 30, 40 percent of the cost."

While it usually takes four to five years for established players like General Motors Co and Toyota Motor Corp to come up with a new car from scratch, Chinese manufacturers can now do so in just two and half years.

"Perhaps the Chinese achieve their low cost by sacrificing quality standards," Nakamura says. "But in many ways their way also points to 'over quality' or 'waste' we have built into our conventional design process over the years."

Global automakers continue to sell their pricey cars to rich Chinese, but local Chinese automakers had to come up with cheap cars for the masses.

Their solution in coming up with affordable cars was to simply copy the designs of foreign auto makers.

"Around 2000, China began embracing an approach it described as 'reverse-engineering.' It was essentially a fancy word for copying," Dai Ming, a senior engineer at CH-Auto Technology Corp. says. "The problem with those copied cars was that the Chinese were able to emulate the shape of a foreign car, but not its soul."

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