Chinese car invasion not an immediate threat

We’ve all heard the hype: China’s car industry is taking off and soon the market will be flooded with cheap - if somewhat homely - people movers. It turns out the hype is just hype. The Chinese auto industry is still in its infancy, and production capacity is still struggling to meet growing home-market demand, so the rest of the world is safe - at least for now.

China’s combination of booming economic growth and concurrent high demand for automobiles means that domestic marques like Chery Automobile Co. will see their production move to even lower-cost countries in southeast Asia, according to China’s chief diplomat in Washington, D.C., reports the Detroit News. The reasoning is that high-wage countries - such as the United States - cannot economically manufacture much at all. And China’s economic growth means many areas of the country will be forced to move production elsewhere to keep costs low. These challenges will slow the expansion of China’s auto industry into the global market significantly.

There is some chance that partnerships with more established auto makers could be an alternate means for China to enter the global market. But many companies do not feel the Chinese makers are currently producing platforms that are suitable for their needs. For example, Chrysler LLC and Chery have an agreement to use Chinese-built subcompacts in the U.S., but Chrysler officials recently said Chery does not currently have a vehicle that meets their requirements, although that just means the production of a Chrysler-Chery joint subcompact will be delayed until the Chinese maker can produce a car that satisfies Chrysler’s production standards.

Chery does still have plans to work with Fiat and is looking to grow new partnerships, according to Chery CEO Yin Tongyao. Tongyao also hopes to build 1 million cars annually in China by the end of the next decade - an admirable goal, but still focused on the Chinese market, not the global market.

In other words: the nascent Chinese auto industry is still working to reach global production capacities and quality standards - global domination will have to wait.