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(Letter from TonyP4) China auto after Detroit

July 15th, 2009 21 comments

China is finally coming after Detroit from this WJS article
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.

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