China’s automakers find new success at making better carsBEIJING (Reuters) — China keeps getting better at making cars. One reason: It’s getting better at cutting corners.
Zhejiang Geely Holding Group Co., one of China’s biggest carmakers, conducted 20 to 25 crash tests when it developed its popular Panda model, engineers involved in developing the car told Reuters.
Global car makers typically conduct 125 to 150 crash tests for each new model. By relying more on computer simulations, Geely saved at least 200 million yuan ($31.57 million) and two years in development time on the Panda, the engineers said.
Paring back on crash tests, skimping on frills, simplifying designs, using cheaper materials and, in a departure for the industry, outsourcing most of their design and engineering are having a profound effect on the cost bases of China’s dozens of automakers.
Some are now able to sell cheap and cheerful small cars for about 40,000 yuan ($6,350) — less than half the price of a plain vanilla Toyota.
Ten years ago, no discerning Chinese consumer would have bought China-designed cars. Not only were such vehicles accused of being illegal counterfeits of foreign models, but their quality and safety were also mistrusted.
Now, despite their homely looks, some indigenous models are striking a balance between no-frills affordability and acceptable quality. In China, it is the age of the good-enough car — and that has potentially significant implications for the world auto industry.
Models such as the Panda and the Great Wall Haval H3 are becoming popular not only in China but increasingly so in emerging markets, from Indonesia to Egypt and Ukraine. They are driving China’s auto exports to record levels, even as growth in China’s auto market slows down.
Getting traction abroad
Exports of Chinese-produced vehicles are forecast by China’s auto association to hit one million vehicles this year from 849,500 vehicles last year. Some automotive analysts are predicting a 50 percent increase to 1.25 million vehicles.
Some executives at big foreign manufacturers say China’s new model of creating good-enough cars poses 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,” says Shiro Nakamura, a top Nissan Motor Co. executive and the company’s chief designer. “Now the Chinese are saying they can cut another 30, 40 percent of the cost.”
It normally takes four to five years for established players like General Motors and Toyota Motor Corp. to come up with a new car from the ground up. Chinese manufacturers can now do so in just two and half years by deploying an abbreviated design process.
“Perhaps the Chinese achieve their low cost by sacrificing quality standards,” says Nakamura. “But in many ways their way also points to ‘over quality’ or ‘waste’ we have built into our conventional design process over the years.”
“My vision,” said Geely Chairman Li Shufu, “is to sell outside China the same number of cars we sell within China.”CH-Auto also has a major contract from Dongfeng Motor Co. — the 50-50 joint venture between Nissan and Dongfeng Motor Group Co. The team will develop a subcompact car based on the Nissan March (known as the Micra in Europe) to buttress a new “indigenous” brand called Venucia launched in China earlier this year.
The advent of the good-enough car is emboldening Chinese automakers to build up their own product development capabilities to rely less on CH-Auto and other independent engineering houses.
Geely, one of China’s top indigenous car makers, is expected to sell about 370,000 cars in China and 90,000 abroad this year. By 2016 the company forecasts its export volume will hit as high as 300,000 or possibly 400,000.