Australia is in a tense stand-off with China. But nobody told Australia’s car buyers who are gobbling up Chinese imports at a rate never before seen.
The phenomenon shows just how broad the Chinese economic relationship with Australia has become, and how hard it will be for either side to fully untangle itself, even as political relations become dangerously rocky.
China has rapidly developed it automotive sector, following in the footsteps of its east Asian neighbours Japan and Korea. The country is home to dozens of marques, several of which are proving very successful in Australia.
As the next graph shows, sales of Chinese cars are up 40% this year, while sales of German cars are down 30%.
For now, the absolute number of cars sold is moderate. Imports of Chinese cars to Australia are just under 16,000 — less than 10% of Japan’s sales volumes (188,000) and a quarter as many as Korea (77,000).
But the Chinese domestic car market is the biggest in the world — 21 million cars were sold last year. As domestic demand in that country dips during coronavirus, expect more to leak into the global market.
From a buyer’s perspective, the appeal of a Chinese car is blindingly obvious. You drive off the lot with much more money left in your pocket.
You can buy a Ford Ranger for $44,740 … or the Great Wall Steed for $24,990.
You can buy the top spec Mazda CX-3 for $40,000 … or the top spec MG ZS for $25,500.
MG was once Morris Garages, based in Oxfordshire, but is now owned by SAIC Motor Corporation Limited, a Shanghai-based company owned by the Chinese state. After early unsuccessful export forays with the Chery and Great Wall brands, China has grabbed a couple of foreign brands to help ease the way for its exports.
China’s car industry has been open to foreign help for ages. As early as 1984, under the influence of leader Deng Xiaoping, China welcomed Volkswagen to the country.
VW established a joint venture in Shanghai and hasn’t looked back. It is the top-selling brand in the country with more than twice the market share of the second-placed Honda.
Foreign investment and know-how have meant China’s car industry has leapt ahead quickly. China had eight cars per 1000 people in 2003. It now has 188. (Australia has 730, Hong Kong has 92.)
China leverages foreign intellectual property to this day. As well as MG, it owns another once-famous British marque, LDV. If you find yourself behind an LDV in traffic these days you can be sure it is made in China and fully Chinese-owned.
Volvo is Chinese-owned too, by Hangzhou-based automotive conglomerate Geely. Geely makes some Volvos in China. Buy a luxury European car and there’s a chance it is made in China — although Volvo Australia doesn’t make it easy it find out precisely where its cars are made. Tesla has also opened a factory in China.
Making cars in Asia is certainly not a new move for the global automotive industry. Australia’s second biggest source of cars is Thailand, despite Thailand not having recognised brands. So we can expect a great flow of Chinese cars to Australia, at least so long as the economic relationship is not torn apart by the political.
The dramatic deterioration in the relationship between Australia and China comes on top of the politicisation of several Australian exports. Beef, barley and wine exports have all been in dispute. Education too.
China’s President Xi Jinping seems to have taken a leaf out of the book of US President Donald Trump and is antagonising trade partners, a major break with Chinese practice. But China is not America. It is a low-middle income country with a dependence on exports for growth. (America, meanwhile, has the lowest trade-to-GDP ratio of any country.)
This is why Chinese car exports are so interesting. The history of the Chinese car industry is an illustration of its dependence on the rest of the world for its progress. China has arguably saturated its domestic market; its cities are very dense and its roads are beyond clogged.
For now, China exports only 3% of its car production, but if it wants its economy to keep growing it will need to export more.
Australia’s modest but fast-growing Chinese car market represents part of a huge opportunity for China to make its economy stronger.
We need to recognise that we are not just takers of cheap Chinese cars. We’re important to China’s economic development — and economic development is the source of legitimacy for the Chinese government.
In the great geopolitical game we may be small — but we’re not bereft of leverage over China.
“once-famous British marque, LDV. “
LDV emerged from Leyland DAF through a series of mergers, takeovers and relocations. The “marque” ( no more than a fancy marketing term when applied to a car brand in current production) may have been famous, but its products under the Leyland brand were mediocre at best.
When the motherboards or other electronics on these Chinese bargains go kaput, don’t expect the supply chains to be operating reliably.
You mentioned at least one dirty word there: “Leyland”. They haven’t built a decent car since the Morris 1000. They designed some good ones: Austin 1800 and P76, but the build quality was shyte. Certainly nothing to do with ‘luxury’. If the rest of the article is as good as the reference to LDV I’ll be sticking to European cars from now on.
Agreed : the P76 wasn’t at all bad although a bit rough in places.
China is proving itself to be an unreliable trade partner willing to use pressure tactics and intimidation the achieve its goals of universal hegemony. While Australia should not behave similarly, it would be prudent to link up with South Korea and Japan to produce the next generation of electric vehicles. These could be assembled in Australia.
We are ideally positioned to make batteries for these cars and For rooftop solar systems utilising our extensive Lithium, Cadmium and Rare Earth deposits. A rapidly expanding export market awaits.
The building of an extensive recharging network powered by renewable energy would be part of the package. Do we have the foresight and political will to pursue this as we observe in forward thinking Norway? Not with the LNP in control methinks.
Three points worth making;
Re: Apple – to say nothing of the labour costs in the USA even at the minimum wage. The minimum wage varies by State (as it does by Provence in Canada) but it is insufficient to support a “basic” family. it is only a matter of time (Biden?) before the minimum wage increases by something like 1/3.
Almost ALL of the jobs created by Trump have been at the minimum wage that that is just the problem; particularly in the case of a pandemic.
I’ve seen 2 short videos recently that help understand the gap in capital productivity.
The first was of a railway station being built in a city in China in 9 hours i.e, 9 hours after the engineering and construction team got to work, commuters were hopping off the trains, and heading to work.
Naught to do with ‘cheap’ labour – Asians dominate tertiary STEM education in places like the US. And, the Chinese dominate the Asians pursuing those streams, And, of the 4 STEM streams, in the US (in 2018, IIRC), it was the “E” for Engineering where they were most dominant (circa mid 80’s % of Engineering graduates came from Asia).
The 2nd video involved that peanut from Top Gear.. …Clarkson! driving around the highways and byways (‘motorways’, I recall him using) in China.
His expression throughout the short video could be described as ‘aghast’.
Culminating in his final words; ‘The West is stuffed’.
Hardly a Sinophile, ‘Jezza’.
I’m NOT a reductionist David and I certainly did not infer that the characteristic was ONLY cheap labour. What I did imply was that the USA would NEVER become “great” again via manufacturing!
By way of an example, I had an apartment close to Hushu Rd (Lu in Mandarin) in Hangzhou. An overpass was built directly above the road.
I had a mate visit form NZ during the National Holiday in 2013 who has half a clue as to construction. We embarked on a tiki tour for the week (long holiday – not the best time but manageable). He returned via Shanghai and upon returning to Hangzhou I sent him a photo of the overpass. Shortly afterwards (work 24/7) I sent him a photo of the completed project. My mate said that in NZ the committees would bang on about it for two to three years (and get paid) and the construction would take over a year.
Example 2. The HoDs (Heads of Depts) were invited to a site where the new school was proposed; consisting of government buildings for admin staff. We were shown the plans previously and invited to make submissions. This was during May 2011.
Cutting to the chase it was announced mid June that the students would be there by mid August; dorms (M/F) built with a dining room, gym etc. ALL of the foreign staff assumed August 2012 but it turned out to be (I was astonished) 2011 afterall.
If this parliamentry mob had any idea a fast train service (250+km/hr) could run (numerous classes of passenger; top class to backpackers) + heavy freight
could be built within months between Darwin and Adelade or A to B anywhere with satellite surveillance of track conditions.
If you can provide an email address I’ll send you some pics of top class seating on a Chinese train; much better than 1st on Qantas (which is a joke).
Oz could have had a partnership with a major global player but, I’d say, its history now.
The road that over which the viaduct was built was Wenyi Lu (or Rd). One can see it on google.
Didn’t take you to be a reductionist. Just emphasising the importance of capital productivity
Along the lines of both David Graeber’s demise, and your mate’s Kiwi ‘committees’, I watched an interview of Joe Rogan’s with Oliver Stone, a few days ago.
Stone described his time in Vietnam, and mentioned he later found out that for every ‘fighting man’ the US sent to Vietnam, they sent 5 ‘bureaucrats/political advisers’.
He then went on to say the ratio is essentially the same today, the difference being most of the 5 these days just spend their time in D.C., wandering the corridors of power looking for an ‘angle’, with more of the 5 now being in the ‘private sector’.
Which means, in terms of capital productivity, military capability comparisons based on spending alone are largely meaningless.
I have written an essay on this stuff for an academic audience which also shows how Trump’s Administration has by-passed strategic committees of the US military. Truly f’ing scary!
As to one more example, I could have mentioned the earthquake that occurred in 2010 in SichuanProvence and in Christchurch (NZ). Everyone was rehoused (complete with paint job of their choice within 5 weeks and about 85% were rehoused in under 19 days. The Hu offered assistance to NZ (heavy gear, manpower and so on). Key (PM at the time) returned a “thanks but no thanks”. Something like six years hence ChCh was still messing about.
It is like the west decided to just not bother with development, like a bored player of a 4x strategy game hitting end turn and mashing close on popups because they’re certain to win. We’ve probably seen the greatest advances in productivity of labour in history within our lifetimes and all pissed away. At least billionaires can have pet rockets now!
This is another chunk of the Thin Review article I referred to in my reply to “Bref” further down this page;
“Julius Wei, co-founder of advisory and wealth management firm for Chinese investors BMY Group, said the relationship threatened to hurt the flow of talent into Australia. “There is a fear that the Australian government and people in general don’t welcome the Chinese, and that’s bad for a country that depends on China for migration… of people with high-quality talent in terms of education level, skillsets and even have a background of bringing innovative new ideas,” he said.”
China, exactly like the US, imposes sanctions on countries that dont comply to their will. In this instance, China has been highly offended by the megaphone “diplomacy” of Hillsong Scotty and his intemperate Right Wing Racist Government. You reap what you sow.
As to Australian made solar panels and electric cars, China is already the #1 producer of both. China is also the world’s largest producer of rare earth elements too btw. Manufacturing in this country is uncompetitive.
I’ve never heard of LDV. The use of the MG brand is shameless appropriation, as the Chinese MGs have nothing in common with the British make of yore. Sure Chinese cars are cheap, but you get what you pay for. Safety is poor, design is behind the pace and build quality is ordinary. I get the point about leveraging the consumer angle, but boycotting a brutal and authoritarian regime is not the only reason to not buy Chinese cars.
You would have to quantify ‘safety’ Merlin. I didn’t see too many Chinese manufactured cars falling over during my decade in the PRC.
Moreover, as Murphy points out : Chinese cars ARE popular in Oz.
As for boycotting I hope, for your sake, that you can make a good batch of cockroach soup when there remains no perfect country to trade with; given, of course, that Australia is above criticism in all matters.
Chinese cars have had a poor safety record, as evidenced in the Australian New Car Assessment Program ratings. Admittedly, this is now improving.
I’m not looking to trade with only perfect countries. I think it’s perfectly reasonable to not buy from the worst ones.
Just were does the USA fit on your line between ‘best’ and ‘worst’? Select a country and we will take a look at its record. It is the detail that matters Merlin.
The USA has serious problems. It, however does not: lead the world in executions; pursue deliberate genocidal policies to eliminate specific ethnic groups (including imprisoning millions in camps for the purpose of re-education); and brutally repress non-government sanctioned media, social and religious organisations. The US also has regular free elections, which provide an opportunity for citizens to input to the political process. I will boycott Chinese products before I boycott US ones for these reasons.
Take a look at what Chomsky has written regarding the foreign policy of the USA. A few essays from Vidal may prove instructive also. Then there is juvenile imprisonment for petty shoplifting and the list goes on. As for social harmony buy a news paper before too long.
Elections : read de Tocqueville or failing that consider what the PRC produces (R&D) and what Australia cannot do so – and the pillar-to-post government that we have.
There are hundreds of ethnic groups in the PRC and almost all get on with their lives without a problem. That includes Xinjing. Ever been there (because I have been there). Yeah; put ya neck out and you will get it chopped off but one has to invite the drama in the first place.
You have selected some rather emotional adjectives; presumably for ‘effect’ but let’s take the review further (i.e. globally) if you are interested.
Nice information Jason. Where can I buy a Chinese electric car?
The domestic market is increasing significantly in composition and sophistication. YOU really need to spend about three months there looking about and not just in the major cities.
While exports are very important (hence the manipulation of the RMB) the economy of the PRC will develop as the domestic market develops.
As to cars they are a matter of prestige; especially with the 30s age group. No one (to speak of) sees where one lives but the DO see what one drives. That is the point. Watch, typically, an immigrant from Asia in their first month in Australia. The deposit on the BMW comes before anything else. There is a common adage in Mandarin which translates as “I will eat dirt to get what I want”. Yes, they have clogged the roads in most Asian countries with the exception of Japan (odd that).
Chinese teenages will not buy Japanese stuff (Sanyo or anything else) but they will listen to and buy Japanese music and some forms of dress. Their grandparents and g.g.parents are ok with Japanese cars, however despite a re-run of the history of 1937 on every TV channel at least once per day.
The opportunities for Oz are leigon with the PRC but not with this myopic Trump-clinging (zero-sum game) mob that happens (spooked by Shorten) to be running the place. The history COULD be very different but it isn’t ganna be so.
The market is already enticing enough that companies will bend over backwards for access, and they can expand it by improving the standard of living across the population.
However, while the capability is there to keep expanding despite any potential lost export markets, I think Jason is right here, they’d be mugs to throw away their export markets. The only upside for them leaving markets like ours is we would be hurt more, the way we are now.
Our government has been inept handling the relationship with China, but I can’t commend China’s recent behaviour. Their actions are understandable in the geopolitical context, but so very unedifying to watch. Sometimes seeing history unfold in real time sucks.
I have spent a fair amount of time in 3rd world countries over the last five years for various reasons. I have yet to visit any 3rd world country which the PRC hasn’t got by the shorts. Panama to any African State; you name it. The PRC are widening the canal (I chatted with the surveyors only last year) for the super-super-tankers to come from Venezuela where the PRC is repairing the refineries.
I could provide any number of equally significant examples. What annoys the hell from me, Draco, is that we have a Front Bench, conducted by the ASD who literally cannot know, given the decisions, what game they are in.
There is no way in hell that the PRC is going to “throw away its markets” (try muzzling in) but Oz could be swapped out for (e.g.) Venezuela tomorrow. Their ore has a greater iron content that that from WA. Australia is on damned thin ice.
Inept is NOT the word. The government has deliberately destroyed an otherwise very mutually beneficial relationship in science and technology alone. F.ing unbelievable!
As for Murphy, a day or so ago, he had a crack at explaining debt from a Keynesian perspective. A group of students from a very good yr12 class could have done a better job; certainly in China and in English.
Juxaposed to the USA, I your remark as to ‘behavour’ remains unclear. Shall we begin with the annexation of the Philippines?
Always a pleasure Draco.
The US is awful, of course. That is what I mean by it being understandable. I don’t like to hold up other countries to standards we can’t reach (all of the Pacific must be laughing at Australia right now), however, I don’t have to like it either. Not that it matters. Sometimes I do like to have a short break in caring about what this country does to talk about other countries, apologies if my post read too one sided.
I was being diplomatic about the Australian government, too kindly. I don’t like being put in the queue overnight. We would also be mugs to throw away trade with China. As you say, so much damage has been done. It is difficult to read it as anything but an ideological choice to get into a fight with China. I can’t see any upside to the bridge burning Canberra is so busy doing.