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Why China won't be building our cars

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By Alisa Priddle
Detroit Free Press
Published:
DETROIT -- Making cars in China has been used to scare voters and even Chrysler workers in the presidential campaign's waning days, but the reality is Chinese-assembled vehicles will not be exported to the U.S. any time soon.
It makes no economic sense for major Western carmakers to build there and ship here. China-based automakers have not met the safety and quality standards to compete here yet, say automakers and analysts alike.
In addition, the Chinese economy has slowed; the nation's domestic automakers are in survival mode, struggling to make money at home with no desire to use precious resources to establish dealers to sell in the U.S.
"The general stance is to build where you sell," said Mary Barra, head of global product development for General Motors. "It makes sense from a quality, supply-chain and cost perspective."
Revered investor Warren Buffett has lost money on his investment in BYD, a Chinese manufacturer of electric cars.
Then there are the political reasons: China is a hotbed of instability right now as it prepares to undergo leadership change.
"Things on the ground in China are more uncertain today than any time in history," said Michael Dunne, author and president of marketing firm Dunne and Co. in Hong Kong.
These factors put into question the logic of U.S. presidential candidate Mitt Romney's attempt to link the government rescue of GM and Chrysler to moving American jobs to China.
"Bashing China is an easy card to play," said Andy Serwer, managing editor of Fortune magazine, speaking in Detroit last week at a global forum on China.
There are up to 100 domestic automakers in China, Dunne said.
The author of "American Wheels, Chinese Roads: The Story of General Motors in China" sees only two Chinese companies remotely close to selling their brands in the U.S.: Great Wall and Geely, which has a foothold because of its purchase of Volvo.
Even still, Chinese automakers "are still 5 to 10 years from selling cars in the U.S.," Dunne said at the Fortune Global Forum. "Quality, safety and emissions levels are not there yet."
Sure, China exports 1 million vehicles a year, but they are sold in other emerging markets with equally low safety standards and technology expectations, Dunne said.
Mainstream Western brands build vehicles in China with Chinese partners, but only for sale to China's emerging middle class, which has created the world's largest auto market.
"People need to remember China is not a manufacturing base. It is a consumer base," said Anderson Chan, a Ford spokesman who grew up in Taiwan.
"Everyone wants to be a global brand, but the reality is the low-hanging fruit is in their own market," Chan said. Established brands are profitable now in China and don't need to expand outside the country.
The Chinese are quick learners, but, like Dunne, Chan still sees them as a decade from being U.S.-ready.
"They still have a ways to go on quality, safety and technology to be acceptable for American consumers," Chan said.
China's domestic automaking base is consolidating. Companies are going out of business and dealers are closing, Dunne said.
For big global players like GM and Volkswagen, however, the forecast is still rosy.
GM's Barra is pleased with how its brands are positioned, with two luxury brands poised to take advantage of growth in a segment that is already 1 million strong. Luxury cars sell for $60,000-plus, and almost all are paid for in cash.
German automakers have dominated the luxury market, but their cars are becoming common. Affluent Chinese consumers want something different. Cadillac, Infiniti and Lincoln, which debuts in China in 2014, could change the competitive landscape.
But in the near term, China's economic growth is slowing.
Consumers are skittish because of China's political leadership is about to change. The Chinese Communist Party Congress begins Thursday; its main objective is to choose successors to President Hu Jintao and Premier Wen Jiabao.
The meeting takes place amid growing concern in China about inflation, corruption and more aggressive expressions of public discontent.
"I'm still very bullish on China, but looking for a rocky time in the next 12 to 18 months," Dunne said.

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