A Chinese Car in Your Future? Yes, if They Fix the Big Safety Problems.
Just one city, Beijing, adds 2,000 cars a day, and had a population of no less than four million autos at the end of 2009. China is car crazy, despite the fact that they're out of reach for working people. Another barrier is that many of the country's gleaming new highways were privately built (in a socialist country) and the tolls are prohibitive at about 12 cents a mile (more than the fuel). No wonder they're mostly empty.
Look around. How many of the goods that you use everyday are made in China? Just about everything, right? And that makes it seem inevitable that we'll soon be buying cheap Chinese-made cars. Actually, it makes you wonder why we're not driving them now--it was widely predicted a few years ago. It turns out there's a very good reason, and it's the same one that got people worried about adulterated milk and lead paint on children's toys. Chinese quality is still a big question mark, and for cars it boils down to not only the likelihood of flimsy cupholders but also fundamental safety questions.
In one of the first crash tests of a Chinese car outside China, a Chery Amulet was subjected to the stringent EuroNCAP collision protocol in 2007. The test was conducted in Russia, which makes sense because the $9,000 Amulet was then the best-selling Chinese car in that country. But much to the dismay of Russian Amulet owners, the car folded up like an accordion. If that had been a person in that car instead of a crash test dummy, a fatality was assured--the whole front seat area was crushed. See for yourself in the video:
Chery claimed bias, because the tester was owned by a Russian automaker. But much the same thing happened that same year when a Brilliance BS6 was crashed by ADAC (the German version of AAA) under identical guidelines. According to Autoblog.com, at 40 mph "the A-pillar collapses and folds up like a cheap suitcase, forcing the driver's door to pop largely out of its frame, while the lower portion of the car buckles like it's made of recycled pop cans." This is a car that was already being sold as an affordable luxury model on the European market.
The Russians also put an Otaka from Geely (the company that just bought Volvo for $1.8 billion) through its paces, and it was another fiasco. A later European test of a Brilliance BS4 did little better--it got zero out of five.
To be fair, it's not only Chinese cars that face safety issues. When the popular British series Top Gear crashed an Indian-made Reva electric car into a table, the table emerged unscathed, but the car was toast. It later failed a more formal 40-mph crash in Australia, too. Again, the Reva G-Wiz has not only been sold on the British market, it has been something of a bestseller there, because with battery drive it avoids the $11 a day London congestion charge.
Paul Midler, the author of the book Poorly Made in China, not only speaks Chinese but he lives there, serving as a middle man between Chinese exporters and western importers. His book is a revelation, detailing firsthand observations of persistent quality problems--and a failure to perceive quality as a serious issue--across China.
"I ride all the time in Chinese vehicles, and I can sense the quality issues," Midler said in an interview during a recent U.S. visit. "The issue is not specific to the toy or the dairy industry--it's more pervasive than that. It's endemic to the manufacturing culture, a sense that quality is a barrier to profitability. The concept of achieving high quality for its own sake is not there."
Midler makes an analogy. "Henry Ford wanted everyone to own a Ford car, including his workers. That gives them a stake in and an understanding of the product. Chinese workers don't have that advantage. The German toy company Steiff recently pulled out of China because the factories there couldn't get the eyes on teddy bears right. But you're asking Chinese workers to care about the details on a toy they would never have owned. And they can't afford cars, either, so that experience is also foreign to them."
I know what Midler's talking about. Blowing up a Chinese-made pool toy emblazoned with Disney cartoon characters, I've often wondered about the thoughts of the seven-days-a-week factory worker watching it roll past.
But Chinese companies aren't letting quality concerns keep them out of the huge and lucrative U.S. market. In fact, Chinese cars are already here. Both Wheego and Coda are using Chinese-made vehicles as the base for the U.S.-market electric cars they'll be selling by the end of the year. But only the basic platform is Chinese--the importers have done the due diligence to strengthen their imported chassis, and the Wheego Whip and the Coda sedan have to pass tough U.S. NCAP tests. In other words, they have to go through crash testing, and they can't fold up like accordions.
Chinese companies will also be selling EVs directly. The most celebrated example is huge Chinese battery maker BYD ("Build Your Dreams"), which is 10 percent owned by financier Warren Buffett (he invested $230 million). BYD has gotten into the car business in a big way, and aims to be number one in the world, replacing Toyota. BYD recently opened an office in California to explore selling its E6 EV here. There's no word yet on how the E6 fares in crash testing.
Chinese cars will undoubtedly get better. "Thirty years ago the image of Japanese cars was that they rusted," said Andy Palmer of Nissan. "So that's how much things can change."
Stefan Jacoby, CEO of Volkswagen's U.S. arm, thinks that Chinese quality will get better, too. "The Chinese are learning, and they will catch up," he told me. Jacoby outlined three Chinese tactics as its industry moves forward into a wider world: It is exporting its own cars to the West, buying existing brands (Geely's Volvo purchase, for instance, and another carmaker was interested in Hummer), and it will come in with new technologies--electrics like the BYD E6.
So let's bring this full circle. Volvo has the best crash protection in the industry, and Geely has challenges in that same department. In this case, the technology flow should be west to east. "The Chinese will do better to keep Volvo as a Scandinavian brand," said Jacoby. I agree, and the Swedes can be a huge help in getting Geely's Chinese cars ready for an international market.
Midler told me something staggering: "The U.S. takes a fifth of what China produces," he said. The other four fifths goes to almost 200 countries. As soon as the Chinese focus fully on what is required to manufacture cars to high safety standards, look out. They will be formidable competitors. And Tom and Ray will be fielding questions about that funny noise coming from Geelys, Cherys and BYDs.