China is on course to build the best cars in the
world
Europeans and other western nations have dominated automotive
excellence for over a century. Whether it is the satisfying thud of the
door closing on a Volkswagen from Wolfsburg, or the beauty of a Ferrari
from Modena, these brands are iconic – and very lucrative for their
manufacturers. When we think of reliability, the Germans, and
latterly the Japanese, have had it sewn up. But if you rest on your laurels,
an upstart will soon be chasing at your heels.
The Chinese are not exactly upstarts in the traditional sense: it’s more
than a decade since they surpassed America to become the most prolific
car-makers in the world. But despite reaching that milestone in 2008,
China’s cars were still mostly clones of cheap western vehicles.
Now, however, China is arguably producing the best cars in the world,
and on track to dominate auto manufacturing. How did this happen, and
will the west be able to regain its crown?
Advantage, Beijing
The centre of excellence in car manufacturing moved from Europe at the
turn of the 1900s to the US with the growth of Detroit as the world’s auto
powerhouse. The 1980s and 1990s saw Japan and South Korea surge
ahead, only for Europe to rise again in the early noughties as
Volkswagen duelled Toyota to be number-one manufacturer by output.
Each continent has added its own flavour along the way, from innovation
in safety in Europe to volume production in the US to lean
manufacturing in Japan. It was Toyota’s manufacturing systems
that saved German-owned Porsche when it was facing dire business
conditions in the 1990s, for instance.
China has gradually built its auto-making capabilities during these
different eras. It originally began making Soviet-designed utility vehicles
under licence in the 1950s, before its state-owned companies reached
similar arrangements in joint ventures with western manufacturers like
General Motors and Volkswagen in the 1980s. This produced cars that
were far better designed and more sophisticated, and soon China’s roads
were becoming choked with western clones.
But if that steadily elevated China to number-one world carmaker by
output, it can now go one better. The goal for any automotive nation is to
produce vehicles of outstanding quality at the lowest possible price,
simultaneously delighting the owner with innovative features and good
design.
Vehicle quality is both about simple reliability and also what we would
describe as build quality: how well the vehicle is finished, the uniformity
of the paint finish, how well the different panels on the body align, and
even – as Volkswagen made famous – the sound the doors make when
they close.
Japanese and Korean vehicles have dominated reliability, while build
quality has been the preserve of the Germans for mass-manufactured
cars, and British names like Rolls-Royce and Bentley at the luxury end
(ironically both are owned by the Germans).
China is now a major threat on both fronts, having had the advantage of
maturing most recently: as each new nation learns to produce vehicles at
scale, they benefit from all the learning and technical developments that
have gone before. Incumbent nations would have to start from the
ground up to unlock these benefits, which is an enormous upheaval and
expense. Many US car plants were built in the 1950s or even before, for
instance.
China is also well placed to build cars for the right price. It still
pays relatively low wages and has millions of skilled workers steeped in
the nation’s strong manufacturing culture. Skilled workers are vital to
reducing automotive costs because they make vehicles that need fewer
adjustments or rebuilds.
China also has excellent shipping links, with many auto factories close to
Shanghai, the world’s largest shipping port. This includes Tesla’s
gigafactory, one of the largest facilities in the world, capable of
producing around 2,000 cars daily. Getting the product out, shipped and
with the customer quickly reduces costs because manufacturers get paid
sooner. Also crucially important is China’s huge components supply-
chain, which is already a large exporter of car parts to other nations. This
all adds up to huge economies of scale that don’t exist anywhere else, and
are difficult to replicate.
Changing of the guard
Admittedly, some Chinese vehicles in the past decade have not had the
design or performance expected by western buyers, so have not sold in
enough volumes in Europe to worry the establishment. Yet this is
changing rapidly. Start-ups like Polestar (owned by Volvo) are building
vehicles that combine excellent build quality and the safety features,
design and performance that western buyers demand. Sales of the
Polestar 2 electric SUV have actually outpaced the Tesla Model 3 in
Sweden and Norway at times, albeit the Model 3 is still the bigger seller
overall.
Comparing vehicles that are built both in the west and China is
particularly illuminating. Tesla’s Model 3 and Model Y cars are both built
in the US and China, and owners in Europe have reported that the
Chinese versions are better. I hear that their all-important panel gaps are
tighter, and fewer trips to the repair shop are required.
Polestar and Tesla both have very modern factories and are fully electric.
Both are designed in the west, as is BMW’s iX3, another fully electric
SUV built in China for export back to Europe. Like Polestar and Tesla,
the iX3 is taking advantage of China’s supply chain in EV batteries,
among other things.
Yet Chinese-designed and built vehicles are not far behind in their design
(if not equal), and starting to invade European markets. Xpeng is one
Chinese start-up that only produces electric vehicles. Having sold well in
China, it is making its first moves into Europe via Norway with its G3
model. Reviews of this compact SUV by the established auto press
have been good. Meanwhile, Nio is another Chinese manufacturer
making great strides in becoming a global name in pure electric vehicles.
It is early days for these entirely Chinese-designed cars to take on the
establishment, and there is always the possibility that geopolitics upsets
progress, but it finally seems that all the ingredients are there. The next
revolution in automotive is replacing petrol and diesel vehicles with
electric. With all of China’s advantages, it could yet lead this shift, and
finally become the home of the best cars in the world.
