Last week, GM announced a production stoppage on Chevy Colorado/GMC Canyon compact trucks due to defective Chinese-made microchips. If one poorly made Chinese part can down a car plant, what if the entire car is Chinese?
The commonly held belief is automotive parts made in China are inherently lower quality than — Insert your home country of choice to determine which nation builds the best parts. While this notion held water two decades ago, the rapidly rising tide of global trade has made those beliefs only partly true.
Remember when the North American Free Trade Agreement was signed? No, well, we don't blame you, it was pretty boring and was signed all the way back in December of 1993 by freshman President Bill Clinton. Opponents (protectionists) considered it a terrible idea and then-perennial Presidential candidate Ross Perot famously said "You're going to hear a giant sucking sound of jobs being pulled out of this country." Well, he was right. Nearly overnight dusty towns along the Mexican border became manufacturing powerhouses. These "Machiladoras," as they're referred to, offered cheap labor with no value added tax, a boon to big manufacturing including the automotive sector. The only problem was Mexico also heard a giant sucking sound, and China was at the other end of the straw.
As cheap as Mexican labor was at about $5 an hour fully-fringed, Chinese labor beat it by miles. Some estimates place all-in labor in some Chinese districts as cheap as $1 an hour. With the maturation of the internet, computer aided design, digital prototyping,and e-commerce in the early part of the 2000's, outsourcing to China became not only cheap, but relatively easy. The considerably more lax safety regulations meant production facilities could use old equipment and outlawed but low cost production methods to deliver mind-bogglingly cheap parts. The trouble came in shipping. Long supply lines over long distances meant only the most complex but lightest and easiest to densely pack parts made sense to build in China, that means smaller mechanical pieces and electronics.
Pretty much everyone in the automotive supply chain jumped into Chinese production with both feet, supplying the capital, know-how, and training to get entire cities worth of factories up and running in places like Guangzhou. Even with those resources though, quality was very poor early on. Stories of hellish work environments, untrained workers doing highly skilled jobs on delicate machinery, and workers manually dipping circuit boards into molten pools of lead were quite common. Stop-shipments and part quarantines were a constant struggle as plant operators tried to cut corners and use cheaper subcomponents to improve their bottom line.
Then things started to get better. Competition within China proved fierce and the shady production companies either went out of business or were bought up for their assets by more successful competitors. OEMs realized China was a huge untapped market and started getting serious about local market production and installed top management positions locally, put down serious work standards and improved training. Sure, this kind of thing played havoc with the overhead, but even doubling the labor rate, heck, tripling it would be more than saved by avoiding one major recall.
And then Chinese manufacturers got into the game. For so long China's "cars" were awful dangerous jokes, brazed together with scrap iron in a dusty factory by 12-year-olds, but the influx of western capital had to go somewhere and it's going into the Chinese auto industry in a big way. It took Americans roughly forty years to figure out how to make a decent, affordable automobile, the Japanese did it in twenty, the Koreans are down to 15, and the Chinese are still in the learning stages, but more than likely their learning curve will continue the trend. Dubiously legal or corporate acquisitions of intellectual property like MG (now Roewe) and the expanding commoditization of subsystems means the expertise to build competitive cars in China is just a fat check away, rather than years of careful R&D. Just go to suppliers and pick seat system A, airbag system B, fuel system x, heating and air conditioning system y, design some adapters and fit it into your own frame, which you can also farm out to a supplier.
So are Chinese cars still crappy? Yes, although it depends on the car. For every well-made Chinese-spec Buick Regal you get a dozen Tang Hua Detroit Fish. Hop inside the nicest Geely and it still smells like hot chemical death, the fit and finish is dicey, and the designs look weird, but you no longer worry over the cold welds holding the door hinge on because things like that have been addressed. The point is, anyone who's been watching what the Chinese are building has seen their prowess develop over a very short time, and if you believe a Chinese-built car will never be able to compete with a Japanese, German or American car, we've got some great ocean-side villas to show you in Sichuan Province. We'll be heading off to China for the Beijing Motor Show later this week, where we'll explore the good, the bad and the maybe not so ugly anymore.