Will the Chinese continue the rise of the Orient?
Wednesday 15 February 2012. Fleet Voice Column.
Arrogance played a large part in the downfall of large scale domestic car manufacturing in the UK. During the 1960s, we had it all our own way – we’d never had it so good.
Then, in the late 1960s, along came the Japanese with these funny wee cars. No one took them too seriously, until in the 1970s consumers cottoned on to the fact Japanese cars were far more reliable and much better equipped.
Admittedly, the Oriental cars rusted at the same alarming rating as most European cars, where you could hear the gentle fizz of oxidation the moment you drove off the forecourt.
It was the same for the British motorcycle industry, only much worse as the Japanese Big Four two-wheeled brands took over the world. They haven’t let go since.
As time wore on, the Japanese firms joined the establishment and became accepted in Europe. Now, we have three separate Japanese car companies with highly productive plants in the UK that employ thousands. Good thing too when the UK needs all of the jobs it can lay its hands on, and it’s also a chance to showcase the UK workforce can turn out some of the best made cars in the world still.
However, the Japanese got a taste of their own medicine in the 1990s when the Koreans started to gear up seriously for the European car market. Where the likes of Kia and Hyundai were once the butt of sneering looks, they are now rapidly gaining social acceptance and waiting lists for their models.
Say hello to the Chinese
Who’d have thought the Hyundai i40, a middle market family car, would have a three month waiting list? Not even Hyundai saw that one coming, but it’s a realist of what happens when you make a good looking car with an appealing Benefit in Kind proposition.
In 2011, Hyundai’s fleet sales went up 58% compared to the previous year and the company is confidently predicting a further 25% increase this year. Those are the figures of a company on the march.
Moore’s Law states that computers double in power every 18 months and this seems to be the principles Korean car companies are working to at the moment.
However, there’s a shock on the way for the Hyundai, Kia and SsangYong. Just as the Japanese delivered a knock-out blow to the British car industry, which to be fair left itself wide open to such an assault, now the Koreans are about to experience what the Brits and Japanese have been through.
Say hello to the Chinese. They’re on the way this year, led by Geely, and the flood gates are well and truly open.
China is one of the world’s largest consumers of cars, with buying power increasing year on year at fantastic rates. This is down to the burgeoning middle class in China who are all desperate to get on four wheels.
There is also China’s Government that is keen to show off the country’s mobility, and what better way than to make its people mobile. It’s cash rich and can afford to go into industries for the long haul. No need for a fast buck here, which is just as well as the car industry is usually a great way to make a small fortune – out of a large fortune.
Vanguard
The trouble that Saab has experienced in gaining funding from the Chinese is partly down to the Swedish firm’s complicated relationship with General Motors. Like so many ex-partners, GM has decided to make life as difficult as it can for Saab, so the Chinese have shied away.
On a much more important and longterm footing, the Chinese are building cars wholly on their own and not just for their domestic market. Until now, China’s own cars are perhaps best described as idiosyncratic.
More honestly, most of them could be described as utter rubbish. Not for much longer. Granted, the car that will arrive in Europe as the vanguard of China’s new car export drive will not be at the cutting edge of style, performance, economy or driving dynamics, but they will be cheap, loaded with kit and appeal to those seeking a bargain.
Much like the Japanese and Koreans before them, the Chinese will put up with the jibes and jokes because they will have the last laugh.
That last laugh will come a lot more quickly for the Chinese than the Japanese or even the Koreans. The reason for this is not just a version of Moore’s Law, but because the Chinese are not just relying on precedence to make this happen – they are planning for it.
Not only is it intending to make it happen within a five-year window, it expects to be on an equal footing with the best in Europe and the USA within that timescale.
Maybe this is a mite ambitious, but the reality is China will get on terms with European and Japanese car companies sooner rather than later. The only saving grace for the established crowd is just that: they are established in buyers’ minds and consumers often stick with what they know and like.
Backlash
In the UK, buyers are also driven by snob power, which goes a long way to explaining why we love our Audis, BMWs, Jaguars and Mercedes so much.
The good news in all of this for company drivers is it will offer even more choice to us when it comes to picking our next car. It will also force the pace of change in pushing down emissions and improving fuel economy as competition is the best motivator for innovation.
So, European, Japanese and Korean car companies need to open their eyes and ears to what is on the horizon. They cannot rely on just selling their cars into China, they must be prepared for the backlash of China selling cars over here.
This is not something to fear for us business drivers, it’s something to embrace. Yes, the first wave of Chinese cars are not likely to have us battering down the doors of dealers, but in time we will come to view Chinese cars in the same way we do Korean or Japanese products.
Don’t believe me? Ask the police forces around the UK who use Hyundai i30s or the queues waiting to buy a Kia Sportage.
Time to start learning Cantonese or Mandarin.
Alisdair Suttie
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