Do ya have a hankerin’ for a cheap small car that can’t be satisfied by an offering from Korea, Japan, Europe or the good ‘ole US of A? Me neither. But Chrysler’s CEO thinks you– or someone– does. On July Fourth (no less), Tom LaSorda finally inked a deal with China’s Chery Automobile Company. As early as 2009, Chrysler could be offering Dodge-branded, Chery-manufactured subcompacts in the US and Europe. Target price: $7k. Too good to be true? You bet it is.
About a week before LaSorda was ordering Chinese, Brilliance submitted their would-be Autobahn cruiser to the Germany’s Automobile Association for 40mph head-on and side-impact tests. The sedan failed brilliantly, earning just a one star rating (five possible). The spectacular result for a Chinese-made sedan has raised new questions about Chery’s readiness to produce vehicles for the U.S. market.
You may recall that Chery, China’s eighth largest automaker, survived a brief association with the sterling silver tongued Malcolm Bricklin, whose numerous vehicular importation schemes include the shameful Yugo. The rupture of the Bricklin-Chery deal cleared the path for the Chrysler agreement. As Bricklin walked away from his abortive Chinese venture, his parting comments were prescient.
“The Chinese need to learn that you cannot develop cars for the Chinese market and then upgrade them for the North American Market,” the entrepreneur proclaimed. “You must build for the North American market and then de-option for other markets, never having two standards for quality since great quality is the only option.”
That’s pretty rich for the man whose Canadian-built SV-1 (Safety Vehicle 1) was famous for its leaking gull wing doors. Anyway, assuming Bricklin learned his lesson, Chrysler didn't. The Sino-American partnership plans to upgrade the Chinese market Chery A1 for the U.S. market.
John Humphrey says Chery’s unlikely meet their ambitious 2009 target for U.S. export. In fact, J.D. Power and Associates’ General Manager for the Asia/Pacific region says that none of the Chinese auto manufacturers are prepared to meet U.S. environmental and safety standards.
Humphrey says Chery is closer to being ready than its fellow Chinese manufacturers, but a U.S.-legal Chery A1 is still “at least a product generation away.” If Humphrey’s correct, Chrysler’s re-branded subcompact is about five years out.
In China, the Chery A1 sells for $7100 to $7900. Both LaSorda and Chery’s CEO have announced that the U.S. A1 will sell for $7k. Does this mean that the American market will get a stripped-down version? Not likely.
Industry analysts say that the A1’s $7k price point is highly unrealistic; they estimate that the Chinese export would have to sell for $10k to turn anything even remotely resembling a profit.
George Magliano, automotive research director for Global Insight is adamant. “I don’t think seven is going to work… In the U.S., this thing has got to be styled right, it’s got to perform right, it’s got to have quality, it’s got to have safety. You don’t get that for $7k.”
Erich Merkle, director of forecasting for IRN Inc., predicts that the Chery-Dodge could cost as much as $15k– once laden with features that U.S. consumers demand (e.g. power door locks and windows, and a high end stereo system).
Immediately after Chrysler and Chery signed their agreement, PRC Communist Party bureaucrats gave official approval to the Chrysler-Chery deal ('natch). At around the same time, the partnership garnered the attention of another government.
Reacting to the importation of tainted Chinese pet food and toothpaste into the American market, Congress plans to hold its first hearings on the safety of Chinese-manufactured goods this month.
The recent recall of 450k defective Chinese-made tires sourcing from the Hangzhou Zhongce Rubber Co. also caught the eye of the Senate’s Commerce Committee. Don’t expect any pity on Chinese manufacturers from the Democrats that now control both houses of congress, who’d love nothing more than to slow the tide of imported cars and Chinese car parts that “steal” union jobs.
The smallest car in Chrysler’s current arsenal is the linebacker-sized Caliber, whose base price is roughly twice that of the proposed sticker for Chery A1 import, whose quality and driving dynamics can’t hold a candle to the Honda Fit, Toyota Yaris or Nissan Versa.
While you don’t have to survey a dealer lot stuffed with unsold Aspangos to appreciate Chrysler’s need for a viable subcompact, summoning a federalized Chery A1 seems a distinctly enigmatic choice.
OK, dumb. If the Chinese import's two years too late and twice the targeted price, it’s going to hit the exact same wall as the Caliber. If the Chery A1 gets a one star government crash test rating… In this country, three strikes and you’re out.
I’ve read before that the Chinese have absolutely no business scruples. They’ll sign a “binding contract” (as Chery did with Visionary Vehicles – aka Malcolm Bricklin and co.) and then just walk away from it if they think someone else is a better partner.
So no thanks – I’ll pass on an “Enronmobile” about as crashworthy as a (chinese made) toaster (which only last 6 months).
Of course, it truly is probably a moot point, because you have to wonder if Chrysler will even be in business in 2009. Sadly.
Walter P. Chrysler must be rotating at high speed in his grave about now.
When (or even if) those cars hit the market, it’ll be like Hyundai 1986 all over again. Hopefully they too will learn the same lessons about quality and safety the South Korean industry was forced to learn.
When the talks between Chrysler and Chery first began the hot topic was the Concept Hornet from last year. Is this vehicle still on the table? If a federalized Chery vehicle is at least another product cycle away, why not make the Hornet? An American designed, engineered, tested vehicle, built in a Chinese factory on the cheap? Personally, I would prefer to drive something that looks like the Hornet than a Yaris or Versa, but then again, not if it’s a deathtrap.
The mere fact that people are already concerned about the safety of this proposed vehicle portends certain disaster for the Chrysler-Chery venture. However, people have a short memory, and if Chery can bring a reliable, attractive, well-priced car to the market they might just pull a Hyundai; but given China’s current reputation for poisonous foodstuffs and appallingly usafe cars, Chrysler-Chery has a lot of work to do.
Orientals learn fast! I remember laughing at the 1963 Honda S500; chain drive, 18-inches shorter and an engine half the size of the bugeye Austin Healey Sprite. The Honda looks better in the photo than it deserves. Then along came the best-selling 1972 Civic…
http://en.wikipedia.org/wiki/Honda_S500
http://en.wikipedia.org/wiki/Austin-Healey_Sprite
In today’s news is a report that China executed the head of its version of the FDA over the tainted food scandals. Talk about accountability! Maybe Chrysler’s or GM’s association with their Chinese partners will engraft that sort of accountability here in the US auto industry. That may be the only way get the US “executives” to actually do something about their company’s “survival”.
I originally had the same thoughts as Jeff in Canada…I figured the Hornet was destined to be made in China by Chery. That would still be the way to go over anything originally developed by Chery…anything developed by Chery (although cheaper than the Hornet) is certain to be a dog. Very soon, Chinese made cars will be here. But I do not believe they will be the panacea everyone fears. I am in the import business–I deal strictly with Chinese factories, and I can tell you how this is going to work… Chrysler is going to farm out all the work to Chery, regardless of whether it is a Chrysler design or not, because Chrysler is broke, greedy, and not smart enough to look at this as a long-term plan…and the product is going to be crap compared to anything on the market now. Also, Chinese wages are rising, the yuan is appreciating against the dollar, and by the time Chrysler gets these on the street, they won't be as cheap as they think. Already cheaper labor is found in Vietnam and Indonesia. That is why I think Chinese produced cars will not take over the world…it took Korea 20 years to go from the Excel to a truly competitive Hyundai. It will probably take China 15 years, and by then, China won't be such a poor country, and their labor won't be so cheap.
I’ll bet the Brilliance car had its structure copied from an existing Euro sedan like an Opel, but then they used cheap steel to put it together, ruining the crash performance.
Which will be the bigger millstone around this car’s neck:
“Chinese Built” or “Chrysler Quality and Design”?
I’m not sure there’s a market for a cheap car in the US anyway. Small and fuel efficent? Absolutely. But if I only wanted to spend $7k – $10k on a car wouldn’t I have dozens of better options at the used car lot?
Chrysler is just just keeping it’s options open with China. No one knows how well China can really produce cars and Chrysler wants to make sure they will be there if/when it occurs. Also this could be quiet posturing for the UAW talks. Auto co strategies are hard to discern,I do not know why- most of them fail.
I agree that when it comes to safety, middle-of-the-road doesn’t cut it. People either want to throw caution totally into the wind and get a motorcycle or scooter, or they want a safe and secure vehicle and accept the higher costs.
A tiny car with poor safety makes no sense in today’s market. The Wall Street Journal just did a piece about how parents are willingly spoiling their kids by upgrading them into bigger, safer cars. The days of making compromises in the name of price are fading fast.
When I go into a department store for this or that, I have a choice between some shoddy Chinese junk, and some shoddy Chinese junk with a domestic label and a higher price. The “domestic” maker’s executives and shareholders decided to save themselves money by outsourcing production; I, as the consumer, simply take the next logical step and save myself money by outsourcing the executives and shareholders as well.
Someone was bound to try this idea sooner or later. Let’s hope it fails so badly that American manufacturers finally learn not everything can be made cheaper by people willing to work for low pay without any meaningful workplace protections or environmental protections. And perhaps more Americans are starting to learn that low price is not the only criteria for purchasing something that, if defective, can kill you. How glad are the folks who bought Chinese tires that they saved $15 a tire over one that won’t explode at high speed?
“I, as the consumer, simply take the next logical step and save myself money by outsourcing the executives and shareholders as well” -kps
This works for spatulas, coffee makers, and shiney bathroom trashcans, but not for vehicles. You don;t take a loan on a sptula, nor do you entrust your familes safety to one.
However, I am very sure there are unseen examples of successful western design/chinese manufacturing. The key is quality control. How close to the assembly line will Chrysler get? By the sounds of it their guys will first see the vehicle when it rolls off the ship in San Diego.
Glenn 126″ Walter P. Chrysler must be rotating at high speed in his grave about now.
Very funny. This comment alone makes the effort of writing this piece worth while. Thanks.
If Chery make horrible junk, as they do now, no one will buy a Chrysler-branded Chery. If and when Chery get it right, no one will buy a Chrysler-branded Chery. Either way, Chrysler loses.
When (or even if) those cars hit the market, it’ll be like Hyundai 1986 all over again.
My first thoughts were along the lines of Yugo, more so than Hyundai. The Hyundais circa 1980’s were decent cars that eventually fell apart, whereas you could watch bits falling off of the Yugo as it sat on the showroom floor. If TTAC had been around at the time to review it, I suspect that the star rating system would have to have been expanded so as to include negative numbers.
With a few exceptions, I think of China as being a low-cost producer, not a producer of quality, and I suspect that they won’t be getting this one right.
That is why I think Chinese produced cars will not take over the world…it took Korea 20 years to go from the Excel to a truly competitive Hyundai. It will probably take China 15 years, and by then, China won’t be such a poor country, and their labor won’t be so cheap.
I’m of the opinion that companies such as GM, that are already well established in China and working to build their brands there, will eventually export US-oriented product from there to here. At the moment, their local production is consumed by the Chinese market, but as production capacity is increased, they’ll start shipping it here.
The Chinese will be able to do internally what the US has done with NAFTA — have access to a low-cost labor force that is within spitting distance of its affluent population. Whereas the US keeps labor costs down by offshoring to Mexico and turning a fairly blind eye to illegal migrant labor, the Chinese have a vast population of rural poor that are in need of work.
Let’s not forget that China has 1.2 billion people — that’s equivalent to four separate United States. Of those, perhaps 10% (that’s a rough guesstimate) are achieving Western levels of prosperity, which leaves a good one billion people left to do the drudgery and aspire to the gravy train. This is a potential economic tsunami in the making, and unfortunately in that equation, the US could deteriorate into the humble little atoll that gets pulverized beyond recognition by the wave.
But of course, none of that doom-and-gloom means that we’ll be seeing Cherys on American roads as early as 2009. Maybe later, they’ll figure it out, but I agree with everyone here that it won’t happen that quickly.
The Chinese market can absorb every single car manufactured in China, the sale of cars is growing by leaps and bounds, along with the pollution and traffic congestion.
This association was initiated by DCX, then dropped by Cherry when DCX sold Chrysler to Cerberus, and now reactivated again. Chrysler edges their future oriented options, and Cherry does the same.
Its a high priority for Chinese manufacturers to have an international presence and credibility.
The Walter P. spinning is “priceless”.
# Ed S.:
However, I am very sure there are unseen examples of successful western design/chinese manufacturing. …
Umm the iPod for one is a good example of how well a collaboration (designed in Cali, made in the far off) can work.
The key is that they seem to be letting Chery partly design the vehicle. Which is insane, I mean sure let them help, and design to their strengths (hand done stuff is a win, robots are not), but even Chrysler ought to be better at design then Chery.
And if they can hit the pricepoint it will be successful. Yugo did ok at first, it was a variety of things that killed them (they were pulled from the market mostly because of the UN embargo). If Chrysler is willing to hitch Dodge’s rep to it (such as it is) then I think it will sell well enough, provided they can hit the price point.
Of course they will hit the price point with a stripped down ac-less, manual window, penalty box. But it will give them good advertising copy. Oh and they don’t need to make a dimes worth of profit on it, look at the Aveo, the stripper might not make much if any money for GM but it gets people in the showrooms, and the options for the Aveo cost about the same as the options for other cars, and carry the same profit margin.
An entry level car’s biggest competiter is the used car market. In order to compete against the slew of former rental cars hitting the used car dealers, entry level cars have to offer better safety features, style and/or fuel economy than your typical 3 year old Impala.
I’m thinkin that by the time Chinese cars are ready for primetime, there will be a slew of Magnums, 300s, and Chargers that will have depreciated into a much better deal.
As skillfully Keanu reeves dodges bullets in matrix, the same artisan masterpieces of eschewing are portrayed by detroit in the venerable field of tangible mechanism building. whenever wobbly services-only guys from detroit have to squeeze a single drop of sweat in a real engineering job, they are twitching in martyrdom and concocting new master plans to save the company with global parts bin. whenever a single detail goes beyond a sun visor or has two parts that have to be assembled together, the detroit muscles convulse in repulsion. giveth us the services, for thy manufacturing is too hard to digest, giveth us those tired, poor masses, yearning to breathe free of engineering, but whose eyes shineth in gluttony for money. I lift my tooling workbench behind the golden door…..
Isn’t it more likely that Cerberus and Chery working together will result in the sale of Chrysler’s IP to Chery?Expect to see chunks of MI boxed up and shipped to Wuhu followed shortly afterwards by thinly disguised Cherokees and 300s pumping out of Chery plants.
How long before “Chinese crash-test results” are added into the axiom of motoring hell, where cars are “designed by the French, built by the Italians, styled by the Swedes, with British electrics”? (Or however that goes.)
As I read this, all I could keep thinking was:
Hey, hey, we’re Adobe!
The little car that’s made out of clay!
We’re gonna save you some money
that you can spend in some other way!
Hey, hey, we’re Adobe!
Hey, hey, we’re Adobe!
Adobe!
May I suggest that it be branded a Plymouth or Desoto to protect what little marque equity Chrysler or Dodge still have…
Walter P. Chrysler must be rotating at high speed in his grave about now.
Cracks me up – good one Glenn!
Let’s see, the $7k Dodge Stir Fry.
Sounds interesting. I predict that Chrysler will go full bore at this idea with the backing of Cerberus and convince Chery to pay top dollar in hiring away talent from Toyota, Honda, Hyundai, etc…to get serious about meeting U.S. quality and safety standards.
While I agree that it’s at least 5 years off, it will arrive to a very different auto industry and potentially a very different U.S. market with at least one domestic OEM in bankruptcy protection and congressionally enforced higher MPG standards.
I can guarantee that Ford & GM are taking a wait and see approach, the question is…do Toyota and Honda already have counter-attack plans for this move?
I was going to say that it does not matter where the car is built, as long as it’s designed up to standard. Oops. It’s Chinese designed and will be jury-rigged to match US specs.
The whole argument about price point does not make sense. It’s not how economics work, it’s not how market works. If indeed, they are creating a car that is not worth more than $7,000 when new, they are indeed engineering a POS from the start.
And at that price, you’re pitching against an ocean of used cars, which last time I checked was not easy competition. Do I want a used Corolla or a new chinese made econobox tincan on wheels? Not that tough of a call.
The big 3 keep amazing me with their relentless pursuit of the “next big thing that’ll save us” while their competition either re-invents itself (nissan) or steadily upgrade, improves, betters their model line up (Honda, Toyota, even Hyunday)
Also, Chrysler used to be in bed with Mitsubishi with various degrees of success, I don’t see how this Chinese “join” venture would be better than just importing the Colt or the Swift for US market…
Walter P. has been rotating in his grave ever since the Iaccoca era and the K-car. Chrysler should have been laid to rest a long time ago and I am sure we would be having very different discussions today regarding the future of the US Automobile Industry if they had been dissolved in the 1970’s. Oh the unintended consequences we suffer at the hands of well meaning politicians.
In the end nature and economic laws will prevail regardless of how much we believe we can control them. Yes we can learn from our failures and the most important lesson is not to repeat the same mistake twice.
If Chrysler thinks it can sell a “new millenium” version of the Subaru 360, they’ve really got their heads where the sun don’t shine.
The “Smart” Car (which is neither) probably started life as a new-milennium Isetta, before they computer crash-tested it and found it to structurally similar to Humpty-Dumpty.
…very different discussions today regarding the future of the US Automobile Industry if they had been dissolved in the 1970’s.
This sounds like a fascinating discussion. Does any of our editorial gods from TTAC care to give us their expert view of Detroit had Chrysler left us in the 1970s?
There’s a couple of things that don’t sit right with me about this article.
1: I don’t know about the United States, but in Europe, all new cars have to publish their safety records of their cars in a document by EURONCAP. This lists every single car sold in Europe and how safe (or not safe, in this case) they are. They particularly like to give praise to cars which exceed their standards and make utter mincemeat of ones which fail spectacularly. Doesn’t the United States have a similar document? If they do, can’t they make public how poor the Chinese cars are?
2: Can’t the United States government forbid these cars to be sold if they can’t meet basic safety standards? If they can, they this is all worry over a product that can’t reach the United States shores unless the Chinese up their game?
3: Isn’t this kind of socially irresponsible of Chrysler? One week before, the Brilliance sedan fails at a EURONCAP test (all European countries’ safety boards have to conform to EURONCAP standards), but Mr LaSorda still signed the contract a week later with a similar Chinese manufacturer?
4: I’m sure as we’ve established many times before, people will pay extra for quality, comfort and reliability, that’s why Toyota are so successful otherwise Hyundai would be eating more of their market share? So, why would anyone pay $7000 for a car which could, potentially be a death trap, when $3500 more you could get a basic Chevrolet Aveo? Not to mention, the amount of fire sales, Ford and GM have, there’s plenty to choose from. At the very worst, $7000 could get you a bargain on the used car market. Hyundais depreciate quite quickly in the UK, so $7000 for a used Hyundai (Possibly still in warranty. They’re 5 years, remember?) is not that much of a stretch of the imagination. If Chrysler plan to sell it in Europe for say £4000, then people can buy a standard Toyota Aygo for £6000! And that comes with a 5 star EURONCAP rating (the best there can be achieved) and Toyota’s reliability.
Please don’t flame me. I’m just trying to use UK standards as a base against American standards. I just can’t see this car getting to market and if it does, who would buy it?
Otherwise, top article! Rubbish car! ;O)
By the way, like Hippo says, I’m sure the Chinese can build quality when they need to.
# KatiePuckrik:
July 10th, 2007 at 12:52 pm
There’s a couple of things that don’t sit right with me about this article.
1: I don’t know about the United States, but in Europe, all new cars have to publish their safety records of their cars in a document by EURONCAP. This lists every single car sold in Europe and how safe (or not safe, in this case) they are. They particularly like to give praise to cars which exceed their standards and make utter mincemeat of ones which fail spectacularly. Doesn’t the United States have a similar document? If they do, can’t they make public how poor the Chinese cars are?
…Otherwise, top article! Rubbish car! ;O)
Yes all cars are tested by a government agency (and generally a highly respected third party agency run by insurers), and this is all public down to body region damage probability. safercar.gov is where all that is stored (and it has videos too).
If a car fails to meet Federal Motor Vehicle Safety Standards (FMVSSs) it can not be sold. Granted the mfg. is the one doing (well actually paying for) the testing, but if a vehicle is ever judged to fail it will have to be either recalled and repaired or recalled and refunded. Not to mention the massive class actions that would ensue.
They aren’t selling the brilliance, so it doesn’t matter.
$3500 is a lot of money, a full 50% increase in price. Some people for various reasons avoid the used car market, and simply don’t have the extra $70 a month. Others simply will assume the Dodge (a fairly major marque here) branded car to be safe.
In all honesty I doubt whatever is brought here will be all that unsafe, certainly safer then a 20 year old airbagless compact would be in today’s world. My guess is it will be as safe as a mid 90s econo compact at the least.
I don’t know that I agree that everything the Chinese produce is junk. They are ruthless in the sense that they will produce to any price point asked, even if it is total junk. Not quite the same thing.
They learned from Americans that low priced junk can be sold at a profit, and American corporations use Chinese manufacturing as plausible deniability but intellectually they own the concept of selling junk.
Trace any high end brand laptop sold in the US to it’s point of original manufacture. The Chinese can build quality when they are being paid to do so.
Look at any boat built by Cheoy Lee.
I have owned a few consumer products with big European labels on them that upon further inspection were manufactured in China, but one would never have been able to tell by quality.
I could care less, but it is a mistake to sell these guys short.
Chrysler has with this move stripped the last of any reputation for quality that they may have had with some buyers. Do ToCoMo or Honda make cars in China? They don’t because they know that the stench of poor quality would invade their whole product line in the mind of the typical buyer.
Mimizhusband,
I’m pretty sure Toyota have a few plants in China? The Chinese will build to Toyota’s specifications and apparently doing it well. the Chinese can only build as good as the plans.
The cost to build and import a Chinese made car, built to US standards, is probably not much less than the cost to build it in the US in the first place. Although labor is cheap over there, thier plants are so inefficient that that ends up being close to a wash. Add in shipping costs and the 2.5% tariff, and the economics don’t really work. It makes much more sense to build them in Mexico, which, being in NAFTA-land, has no tariff, and is closer, so there’s less shipping costs and it’s easier to monitor production for quality.
mimizhusband: Do ToCoMo or Honda make cars in China?
Toyota and Honda both have joint venture operations in China. Toyota is partnered with First Auto Works (FAW) and they produce Toyotas models, including Camry and Prius, for the Chinese market. FAW is also in joint ventures with VW and Audi.
Honda is partnered with Dongfeng, but this partnership is different in that Honda is the majority owner (55%). They build the Honda Jazz (Fit) for export. Dongfeng’s other joint venture partners include Nissan, Kia, and Peugot-Citroen.
Please, Chrysler, do this the proper way. You need to fix your shoddy quality, not make it worse.
Do it properly like, for instance, Honda, who built their own factory in China, did their own design (the Honda Fit) and set up their own supply chain. After all that, Honda is tentatively exporting from China, reportedly still at a loss.
Or do it like Toyota, who is now building the Camry in China (not yet exported).
Let me think. Which car from China would I prefer? A Honda Fit, a Toyota Camry or a Chery? Mmmmm.
For now I think I’ll leave them all over there with the dog food.
KatiePuckrik: I just can’t see this car getting to market and if it does, who would buy it?
I’m not sure I understand your discontent with the article because this sentence of yours summarizes my thesis so well. Everything that Chrysler and Chery execs are saying about this partnership is, as you say, rubbish. The won’t be able to modify the current A1 to meet western standards. They won’t be able to sell it for $7K. It won’t be rolling around US streets in 2009. And the deal does not present any form of economic salvation for Chrysler.
Mr Montgomery,
I wasn’t trying to denigrate your article. In fact, I was agreeing with you. It was a finely written view of things. But, I was geniunely asking the question in case someone does have an answer. So far, I can’t see what someone would get out of that $7000 car that you couldn’t get from a used Hyundai?
Pardon me, if I caused any offence. I’m British; being polite is in our blood! ;O)
After reading some of the hypercritical comments regarding Chinese manufacturing, I would like to clarify my position.
My article was not an indictment of China’s potential for auto manufacturing greatness. I’m sure there is nothing in Chinese DNA that precludes them from being able to build top quality goods just like everyone else. But the fact is that China’s home automobile market does not exist in the same regulatory environment that we have in the west. As such, their domestic auto manufacturers are not ready, and will not be ready for some time, to produce western-grade products.
It’s been said that the Japanese could never manufacture quality products. Neither could the Koreans. Or selected European countries. Or, more recently, the Americans. Etc… Of course, this is all crap.
While it might have been true that in general a country’s manufacturing output has been poor at various points in time, any country is capable of turning this perception around. And so will China.
It might take five years or it might take decades, but it will happen. Those who now say otherwise will really look small minded and won’t be prepared to deal with the competition.
If the safety was brought up to standards, which I’m not sure can be done with this car, it may work. A niche vehicle with no frills with decent crash ratings and a long warranty for under 10K would appeal to some buyers.
Can you get a better value on a used lot? Of course. But some people like the warm fuzzy feeling of new car ownership. A cousin of mine bought a Yugo years ago by that logic.
2 thoughts:
1. The people denigrating Chinese manufacturing quality might want to look at the other side of that glorious Lenovo Thinkpad they’re pounding on to see the country of origin.
2. The Renault Logan sells for the equivalent of $7K in Europe, and its sale and manufacture is being spread around the globe. A perfectly fine $7K car CAN be built — it’s more a matter of will than anything else.
I also own a fine ASUS notebook made in China — trouble free (after 7 months), I’ve received many compliments on its solid construction and quality appearance. Yet, I still think that there are domestic companies that take advantage of the “dark” side of the Chinese manufacturing scene, allowing the use of inferior materials/methods (they build to please) to maximize profit, and the consumer suffers. In other scenarios, the lack of oversight (due to the geographical hurdles involved) usually results in outsourcing gone awry; products that (on paper) were designed with good intent, but end up defective in some way due to a simple lack of communication. There are many pitfalls to utilizing Chinese manufacturing, but greed is the worst offender.
Products are made in China for primarly one reason: labor costs. Chinese labor is cheap.
I’m not in the car business, but I suspect that labor is a relatively small part of the cost of building a car. So, even if you drastically reduce labor costs, the cost to build the car doesn’t change by much.
Commodities like steel, glass, and rubber cost about the same in China as anywhere else in the world. This is where you can save big money – in the materials.
So, if this car is really going to be $7k it’s not because of cheap Chinese labor but because this thing is going to have its corners cut eight ways from Sunday. It will be a cheap, tiny, nasty, unreliable penalty box. Either that, or it will be more like 12-15k.
In addition to labor costs, there’s probably some money to be saved by building in China because of the lax regulatory structure. I’m not sure how much savings is to be had there, but I’d be surprised if it was enough to make a good $7k car.
To summarize: car car that would otherwise be a $12k-15k car isn’t magically going to be $7k just because it’s made in China. Lots of other costs have to be cut.
# Drew:
Products are made in China for primarly one reason: labor costs. Chinese labor is cheap.
I’m not in the car business, but I suspect that labor is a relatively small part of the cost of building a car. So, even if you drastically reduce labor costs, the cost to build the car doesn’t change by much.
Commodities like steel, glass, and rubber, cost about the same in China as anywhere else in the world. This is where you can save big money – in the materials.
So, if this car is really going to be $7k it’s not because of cheap Chinese labor but because this thing is going to have corners cut eight ways from Sunday. It will be a cheap, tiny, nasty, unreliable, penalty box. Either that, or it will be more like 12-15k. Well some quick calculations from Chrysler’s Brampton plant 3500 workers 968 units a day so ~3.5 positions a unit. Assume a rough average of 50k (almost certainly low) for benefits and salary per position and it more or less works out to a labor cost of ~$500 for the vehicle assembly. Assuming $230 a month/$2760 (quite high for China) and the same local the China built cost is ~$28 for labor, which is quite substantial of course there are other concerns (shipping, etc.).
None of those concerns really matter though as the big gain with going with China is you can get access to cheap (but good) Chinese steel which shipped over to the US sets the US market price. So you get some of that shipping back right there, and the same is true for a lot of the component materials.
Remember too that final assembly is something of an after thought. A big help is that one can use Chinese *parts* which allows further labor savings that do add up (and indeed more parts are being sourced from China regardless of where assembly occurs).
I think Chrysler will hit a “Value Edition” price around 7.99k, no one will want to drive that model, but then again that is the norm in the ultra low end (a stripper Aveo anyone?) the real models will start at 10k, and sell well enough.
Importation of Chinese parts does indeed “STEAL” union jobs. It also “STEALS” non-union jobs. It’s going to be hard living in the US on Chinese wages.
I would agree that it is incorrect (and, indeed, foolish and dangerous) to discount the future of China in high-value manufacturing. It is just a matter of time before they become a consistent builder of quality and figure out the nuances of the US market.
That being said, I believe that it will take them awhile to get there, and agree with Mr. Montgomery that it will not be happening that quickly. Auto assembly is quite a bit more complex than the iPod, and the results are more disastrous if corners get cut, so shortchanging the consumer with early production mistakes will rapidly backfire and stigmatize Chinese-built cars for many years to come. (Look at how long it has taken Hyundai to climb out of its hole; after 20+ years, they’re still in the process of climbing out of it.)
And Drew’s analysis above is absolutely on target. Despite Detroit’s hype, labor costs comprise a much lower proportion of their expenses than is often the case for typical manufactured goods. This isn’t because the labor is cheap — it isn’t — but because the goods are more complex and require a lot more parts.
Most of an iPod’s value is in its intellectual property, while its parts are relatively cheap, whereas a car’s resource requirements for steel, plastic, etc. are substantially higher than for most manufactured goods. This factor makes offshoring much less beneficial for auto production than it would be for a cheap trinket or high-margin MP3 player. Factor in transportation costs, distance from suppliers, and the high expense of fixing production mistakes, and offshoring is suddenly not quite as sexy as it might first appear. As many offshore efforts to India have shown, much of the expected cost savings on labor are lost in other ways, resulting in a net benefit that is often lower than expected.
Everybody seems to agree: Chery and Chrysler can’t make a $7K car that will meet European and US regulations and consumer expectations.
OK, how about another possibility that I’ll throw out for the sake of brainstorming. Could Chrysler provide the engineering and Chery provide the parts and labor to make a really, really cheap (like maybe $3,000) vehicle for impoverished third-world nations? You know, countries where 120 people squeeze into railroad cars and 50 more sit on the roof, hoping the train won’t go under any low bridges. In such countries, safety standards are either unknown or quickly forgotten when a bureaucrat is bribed.
Now, this wouldn’t be the kind of car Americans or Europeans drive. In fact, it’d be the first step up from an ox cart. Doors and windows? Needless luxuries. Crash-resistant seating? Hey, the 2CV came with seats that looked like lawn chairs. A radiator? Why–lawnmowers get by with air cooling. The whole drive train would need to be as simple as a Model T’s and able to run on the cheapest fuel. Actually, the “car” might look like and be called something like a “flatbed tractor.” The customers could figure out how to bolt on chairs and a roof to make it a passenger vehicle.
In this country, we live in such luxury it’s hard to remember elsewhere there are a billion people who dream of getting a motorbike. Henry Ford, they need you.
Perhaps this is a total aside, but shaker wrote: “The ‘Smart’ Car (which is neither) probably started life as a new-milennium Isetta, before they computer crash-tested it and found it to structurally similar to Humpty-Dumpty.”
Having been to Geneva several times, the Smart car is…smart…for the right application. In urban areas where parking can be extraordinarily tight (here, San Francisco qualifies) a car that takes the space of a couple of motorcycles can park virtually anywhere. If I want a single car to meet all my needs, which I do, then it’s out of the question. Others, who only need to meet some of their needs with one of their vehicles, and who regularly face issues with extremely tight parking in a dense environment…the first time I saw the car I thought it had it’s place.
As a niche vehicle I think the Smart car makes sense…minus supersizing attempts. As a mass market vehicle…not so much.
50merc:
According to what I read in Automotive News this is exactly what they are doing. A $3000ish car for emeging markets and $7000 (or higher car) for the NA market. Cerberus has approved of this and I don’t think these guys have any intention of importing a car that can’t at least score avg on crash tests. I don’t think they’re that stupid. As a matter of fact I think they are lot smarter that execs at the Big 2. But as they say, time will tell.
Here is a video of the Chery Amulet in the 40mph offset test.
http://www.youtube.com/watch?v=5kQGAK550LE
Unsafe At Any Speed: redux.
ttilley: I wanted to like the Smart Car when it was announced, I really did!
Until cities adapt, the Smart Car will park in the same places as standard cars (metered street parking, garages with slanted spaces); there will just be a lot more room to open the doors. The “Car” doesn’t get much better mileage than a Prius, and has equally anemic (or worse) acceleration because it’s over its design weight for tbe engine and drivetrain. You are correct; in the EU, it would be much more appropriate (simply due to lack of real estate for parking, narrow streets, etc.), but once it’s bulked up to US standards (I wonder how oncoming Suburbans look from the driver’s seat of the Smart Car), it doesn’t solve enough problems (other than being “cute”) to justify its high cost, low performance and mediocre (for its carrying capacity) fuel mileage. (please forgive the parentheses; it’s early, and I’m just rattling of thoughts)
As far as Chery’s (or Brilliance’s) poor performance in crash testing, the Chrysler Grand Voyager didn’t do very well in NCAP testing either. It only received a two star rating with the second star is struck through indicating an unacceptably high risk of serious or fatal injury.
For the full report on the Grand Voyager, go here.
Interesting video about the Chery Amulet in the 40 mph offset test (from Russia). The car is based upon the design of a previous-generation SEAT Toledo. So (except for steel used – no doubt cheap soft steel, not high-strength steel) it is supposed to have been built for late 1980’s crashworthiness.
Looks like a total, dismal failure, though. As mentioned, I suspect it is the cheap steel.
Interestingly there were no air bags in the car when it crashed. But the way it folded up, the “dummy” (whether crash-test dummy, or human “dummy” who bought the thing) would have surely been maimed or died.
Question just for general discussion; are we Americans, Canadians, Brits and Western Europeans getting sissified and unable to take on ANY risk when driving?
My wife’s new 2007 Sonata (4 cyl.) has 6 airbags, ABS, ESP, and a whole alphabet soup of other tech to keep us safe. It’s a 5 star car.
When I bought my Prius 2 years ago, I ordered the side air bags (mostly because Michigan drivers suck so badly – nobody pays attention to stop signs any more – they’re treated like yield signs).
When I lived in the UK 15-20 years ago, I bought cars without any ABS, or air bags, and they were probably not even crash tested. Oddly enough, we bought bicycle helmets for our children, and were roundly made fun of by other parents (“took the mickey out of us”) in fact. Until about 2 years later when it became “the latest thing” and suddenly the Brit government and media started on about bicycle helmets for children.
If any nation can engineer and build a $7000 car that is safe and economical to drive, I suspect it would be China. China graduates many more engineers than the United States. Chinese products have penetrated nearly every high technology market. The U.S. has never engineered and built even a single decent small car on par with a Honda Civic, Mazda 3, Golf, or Mini.
China is currently the world leader in the production of Solar panels and there appears to be a strong demand for energy conservation coming from the Chinese domestic market. According to most business analysts, the Green market is only going to expand in coming years and we look for ways to reduce carbon. The U.S. is resisting this trend and we will continue to fall behind in all forms of alternative energy business development until our failure to adapt hits us in our pocketbooks.
The safety issue should not be that hard to resolve. Existing technologies, such as ESP, ABS, EBD, traction control, air bags, and deformable crash zones, will only become cheaper to produce as they become ubiquitous.
Obviously, any vehicles sold in the U.S. will have to meet NHTSA standards, (unless our current trend towards cronyism prevails, which I doubt).
I look forward to some well-priced, economical and safe small cars coming from China in the near future.
carlos.negros “If any nation can engineer and build a $7000 car that is safe and economical to drive, I suspect it would be China. China graduates many more engineers than the United States. Chinese products have penetrated nearly every high technology market. The U.S. has never engineered and built even a single decent small car on par with a Honda Civic, Mazda 3, Golf, or Mini.”
Agreed it is interesting that the derisive calls of Chinese made junk are eerily similar to the pompous attitude that got Detroit into the stew they are in now.
Their first efforts will fall short but I might consider one after their first generation vehicles arrive
Earlier I wrote that I was unimpressed with the lack of business scruples that Chery showed in dropping Visionary Vehicles for Chrysler.
We mustn’t forget that Chrysler was a willing partner in forging an alliance with Chery and knew full well what it would mean to a prospective competitor, Visionary Vehicles.
Enronmobiles come in various brands, including Chery, as well as Dodge, Jeep and Chrysler it would seem.
But then you see, if you stop to ask any of the workforce around Kenosha Wisconsin (AMC’s one time HQ and auto factory) what happened when Chrysler took over AMC, you’d realize that Chrysler’s management seemed to be “scruples-lite” even back then. Promises were made by Chrysler stating that – oh yes, Kenosha will survive as a car plant – we need the capacity (believable, since AMC had been contract-manufacturing rear drive Dodge Dipolomats and other cars for several years).
Kenosha’s car plant was torn down before the ink was dry on the agreement buying AMC out.
Anyone else ever hear of ‘kizmet’ (aka ‘karma’ in eastern circles)? Well, Chrysler seems to have experienced some of it since, oh, about 1999 – when the Germans took THEM over.
Now, it would seem that both Chery and Chrysler are setting themselves up for a fall.
Perhaps the smaller auto companies of the world should take note of what happened to Mitsubishi (with Chrysler), Suzuki (with GM), Kia (with Ford), Isuzu (with GM), etc. when the “big 2.8” went into “alliances” with them and – as the saying goes – RUN AWAY, RUN AWAY.
When left on their own the mainland Chinese don’t do so well. Yet, when managed by western company, Apple, Toyota, etc..they can produce industry leading products. Of course it is all labor not managerial.
Chairman Mao closed the doors to the rest of the world and now they are playing catch up. If all the mainland Chinese do is duplicate everything they will never learn and it does not matter how many engineers they produce.
In order to succed Chrysler will have to be the brain power in this relationship. Allow the mainland Chinese to just perform the labor and it may succeed.
Loser Boy: I wonder if the Adobe inspired those Saturn plastic panels? I think the Adobe’s fenders were of a better quality than the ones on my ’76 Honda Civic. Cheaper to repair, anyway!