During the Detroit Auto Show that just concluded, a Chinese made car was displayed for the first time in North America. Geely “showed off” their 7151 CK. Now there is a name that just rolls off the tongue doesn’t it? Autoblog has an item about it and also some more pictures. Now I haven’t personally seen the Geely, but from the photos I’ve seen, it looks to be about on a par with the products from another Chinese manufacturer that I have seen. When my friends and I saw the vehicles in question we were not terribly impressed, which is putting it charitably. After taking a look around these vehicles I came up with a potential business model for selling Chinese cars in the US. They could just use the modern consumer electronics model.
First a little background information. One of the factors leading to the increase in steel prices in the last few years has been the Chinese buying up all the scrap metal they can get to melt down to make steel. Many of the huge cargo ships bringing cheap stuff to America go back to China carrying scrap metal.
As you may know upwards of 80% of the products sold by Wal-Mart know are sourced from China. Wal-mart specializes in selling cheap crap made in China to people who think they are getting a good deal. Who would provide a better sales outlet for Chinese cars than the home of the $29 dvd player? Now for these kinds of cheap products you generally don’t get much if anything in the way of service. When you buy a cheap piece of consumer electronics and it fails during the warranty period, you take it back to the store where you bought it. Now when you take something back to wal-mart (or target or best-buy or anywhere else) they don’t have a service department like a car dealer where they fix stuff. If the product is defective and still under warranty they take back the bad one and give you another one. You go home with a new device and the bad one gets shipped off to a refurbishment facility. They check it and if it can be easily fixed they do it, and then repackage and sell it as a refurbished unit. If they can’t fix it, they strip out any useful parts and ship it back to the factory for re-cycling and re-use.
So if wal-mart sells Chinese cars, they don’t have build up a service facility like a traditional car dealer. If you have a problem with the car, you take it back, they give you another one and load the broken one on a trailer out back. When the trailer is full it is hauled off to a refurb center. If they can fix it easily, they do, if not they strip it down crush it and ship back to China to make into another car. Wal-mart would make a hefty profit, people would get cheap, marginally reliable cars and the last high paying manufacturing jobs in this country would be gone forever. Of course the flaw in this plan is that once the good paying manufacturing jobs are gone no one hear will be able to afford even these cheap cars.
Besides the issue of contributing to the continued decline of the US manufacturing base, there is also the issue of the “quality” of Chinese made cars. My exposure to Chinese cars has shown them so far to be very poorly made and not very durable. From what I have seen, many of these cars would have a very hard time making it through one winter on Michigan roads. The potholes on our roads would eat these cars alive. However, I wouldn’t expect that situation to last for long. There was a time when Korean made cars were similarly shoddy and Hyundai now regularly tops the quality surveys. So we had better be wary about what we buy and from whom. We need a government that is serious about ensuring that we have fair trade, not just free trade. As a population we also need to pay attention to the real price that we pay for all the cheap stuff that we always seem to want to accumulate. Pay now or pay a lot more later. Be afraid, be very afraid.