Chinese cars are coming. A good thing for car lovers?

Singapore’s love for branded goods is well-known, and the car market is no exception. Chinese-made cars may soon be high on the list of ‘must haves’. Here’s why:

Technology

Modern cars are the result of more than a century of development, that’s a lot of knowledge that China needs to acquire, and fast. Globalisation is helping – foreign car manufacturers in China have formed joint ventures, transferring technology and know-how to the local industry. And Chinese brands are catching up quickly. In independent tests conducted by the Australasian New Car Assessment Program (which rams cars full of crash test dummies into walls) three different Chinese-made vehicles have achieved the top 5-star rating in 2017, the first time any Chinese vehicles have done so.

Quality

Chinese manufacturing has moved up the value chain quickly, even if the cheap, made in China image persists. JD Power has conducted its automotive quality survey in China since 2000. The results show the gap between Chinese cars and imported ones has declined - from more than twice the reported problems of imported cars, to almost the same in 2017. JD Power forecasts that parity will be achieved in the coming years. The above average brands are arguably the ones that could make an impact in export markets. The Guangzhou Automobile Group’s unfortunately named Trumpchi brand was the best Chinese performer in 2017.

Design

Copycat designs from Chinese manufacturers – there are a plethora of them – do little to help the image of the Middle Kingdom’s domestic manufacturers. But the industry is maturing, and in a global economy, talent is mobile. Peter Horbury, an English designer formerly at Ford and Volvo, moved to a senior position at Geely after the Chinese manufacturer bought the Swedish brand in 2010. It is worth remembering that as Japanese brands came to prominence; they enlisted the help of storied designers such as Giorgetto Italdesign, Pininfarina, and Bertone.

Economies of scale

China is now the world’s largest car market not only by consumption – 28 million units – but also production. China manufactured 24.4 million in 2016. In contrast, Japan, in second place, produced just under 8 million cars last year. The biggest selling Chinese brand in 2016 was Changan, with just over 1.1m sales. Toyota and VW are consistently topping out at over 10 million units each, so the Chinese brands still have some catching up to do.

Brand

Of the top ten car manufacturers by brand value, half are German. Chinese brands have some way to go. Then again, they’ve largely started from scratch, and relatively recently too. Geely, founded in 1986, is listed as the 472^nd most valuable brand worldwide in 2017 by Brand Finance. That’s impressive. And because Geely owns Volvo, it has international distribution and experience, plus it bought a 49.9% stake in Proton Holdings this year. We’d guess it would be the first to push seriously into export markets. Except…

Disruption

Arguably the most overused word in the business world, disruption is coming to the auto sector too. Electric and/or self-driving are coming, and in this new environment the incumbents have less of a lead. Tesla may be leading the way in its disruption of the car industry, but there are numerous Chinese companies producing electric vehicles (EVs), including BYD, BAIC, Geely and Zotye. Hardly household names, but responsible for more than 150,000 EV sales in China last year, or double Tesla’s worldwide sales.

For more car news and motoring tips, look out for regular posts in this series.

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