This page has been archived and commenting is disabled.
China Puts The Screws To BMW
The market is gigantic: With sales of new vehicles approaching 18 million units in 2011, China is the largest market in the world, far ahead of the US, with its 12 million units. Some fearless industry voices estimate that sales will reach 28 million units in 2017—fearless because the China bubble might blow up before then, which would rejigger the numbers on a massive scale, as it did in the U.S., where sales dropped from over 16 million units before the credit bubble burst to 10 million units during the crisis. However, no major car maker in world would want to miss out on the opportunities in China, and BMW is no exception. And yet, risks are mounting.
Relentless pressure from the National Development and Reform Commission (NDRC) of the Chinese government is pushing foreign car manufacturers to share more of their advanced technologies with Chinese partners, particularly in the hot sector of "New Energy Vehicles" that was defined in China's most recent five-year plan as strategic industry. The government cites environmental concerns as primary motivation for this shift to electric vehicles. However, the environmental benefits of electric vehicles are not that clear in a country where about 80% of the electricity is generated by burning coal, the filthiest of all fossil fuels. So there have to be other reasons.
"China should attach great importance to research and development of core technologies in green vehicles," said Wang Fuchang, a deputy director-general with the Ministry of Industry and Information Technology, about a year ago. The goal: Aim for "a global lead in this field by 2020." Through technology transfer.
It's not a law, but every car manufacturer that wants to build cars in China has been given to understand in closed-door talks that it must share "New Energy Vehicle" technologies with Chinese partners. The deadline is 2015. Car manufacturers have responded by offering to create China-only brands. VW already has decided on the brand Kaili, Daimler is following suit, and now BMW can no longer drag its heels.
"We will find a solution," said Friedrich Eichiner, member of BMW's board of management during a press conference last week concerning talks with the NDRC. And he sketched the outline of a solution: BMW and its Chinese partner, Brilliance, will build a separate brand for New Energy Vehicles. However, these cars will not reflect the latest BMW technologies because it wants to give up as little as possible and protect its critical technologies long enough to where they're no longer critical. And the new brand will not have any connection to the brand BMW to avoid "watering it down," Eichiner said.
Fat profit margins: Over 25% of BMW's worldwide profits come from China, though it sells only 15% of its production there. And it's just scratching the surface of the 1.3 billion potential customers. The versions sold in China are more profitable because they're loaded with luxury items and are specifically designed for Chinese tastes. The rear seat is the most important location in the car as BMW owners in China tend to have chauffeurs. Hence, rear seats are more comfortable, afford more legroom, and offer the latest infotainment, not only in the 5 and 7 series but also in the smaller 3 series.
To meet the Chinese demand for its flagship products, BMW is plowing $1.4 billion into the expansion of its plant in Tiexi, Shenyang province. The plant will then have an annual production capacity of 200,000 units. With the 100,000 units from its Da Dong plant, BMW will have a capacity of 300,000 units in China.
A risky bet for BMW. These outsized profit margins and rapidly growing sales are what BMW is trying to protect in the near term. And so it has to yield to the demand by the Chinese government to share technologies with Chinese partners. But in the longer term, especially if electric vehicles take off, BMW might create formidable competitors that will try to eat its lunch down the road.
For an example of how fast small Chinese companies can blow away worldwide competition: "PROST! Germany Lost the Beer War, And China Won).
Wolf Richter - www.testosteronepit.com "where the truth comes home to roost."
»
- advertisements -
Beauty Equipment
Wholesale Belt
Wholesale Tie
Photo Frame
Garden Decorations
Gift Box
Valentine Gifts
Hair Products
Crystal Gifts
World Cup Products
Promotional Gifts
Wholesale Gift Bags
Solar Products
Manicure Set
Water Bottle
Promotional Gifts
Cleaner Products
Wholesale Coaster
CD Holde
Wholesale Whistle
Wholesale Towel
Digital Photo Frame
Tangle Puzzle
Beauty Equipment
Wholesale Kitchenware
Wholesale Mat
Cleaner Products
Wholesale Tie
Wholesale Umbrella
Wholesale TelePhone
Wholesale Tag
Wholesale First Aid Kit
Wholesale Cards
Garden Decorations
Wholesale Tellurion
Wholesale Umbrella
Wholesale Clothing
Electroluminescent
Advertising Material
Wholesale Socks
Wholesale Golf Products
Name Card Holder
Voice Recorder
Wholesale Bracelet
Promotional Products
China is still communist. This is what a communist state does. Why is this surprising? The whole idea is based on government ownership. There is no stealing unless you have private ownership. As for western companies doing business there, I am pretty sure Harvard/Uni of Chicago might have a study or two you can look at. Beware, the study's recommendations will not work more than 10 years and probably more like 2 or 3 years. Of course, this is in bell shape curve years.
anyone that does business in china with some product that they manufacture will lose. because the chinese reverse engineer everything they come in contact with and then start manufacturing it and calling it their own......just ask the russians why they no longer have much cooperation with military stuff....
Sounds like a certain gargantuan software company in the Pacific N'west.
Holy cow! Are you speaking about US citizens? Because you've just depicted the behaviour of your typical US citizens...
Wang Fuchang bitchez!!
Woo, how unfair from those damned yellow commies.
Can I use worthless fiat dollars to buy strategic companies?
Can the Chinese buy 3COM?
It's their country. Their rules. Stop whining.
Commies? And why not capitalists?
Isnt it a ring that in capitalism, customers are kings? So what now?
I am 39 years old. When I was 7 we were told we better learn Chinese because they would be everywhere. They were wrong. Now I understand that China is huge and ever developing - but I can definitely tell you that not knowing Chinese has not hurt me. Certainly some will say it is coming, but I would argue that we just flat out have different lives. They are in the beginning of their industrial revolution. The rural population is slowly moving toward the urban society. It is amazing and definitely moving toward the right direction but please acknowledge that Time is a key to this entire situation. And I can tell you it always takes more time than you think.
Remember we are headed for the global village. Everybody will be neighbours borrowing each others lawnmowers, hedge trimmers, technology, etc. and throwing their waste over the fence.
Too much growth too fast makes waste. Thank God for the economic slow down.
Now where is my straw hat and hoe.
I don't know where your hat is, but the hoe was sitting on her keyboard all day yesterday and yakking it up on her phone.
If I were you and had kids coming of age, I would watch this guest lecture and take notes...
http://www.youtube.com/watch?v=6a0zhc1y_Ns
Thw Western, so-called Capitalist world dreamed up "Patents", allegedly to monopolize their tech and stimulate invention.creation.
In fact, China's tech was adopted freely by others before "patents" existed.
For mind-blowing insight into the truth of the magnitude of China's inventiions beig used elsewhere, freely, prior to "patent" triickery and lawyers' debating flimflam, go to a good library and look at Campbell's [and others], compilation surveys of pre-patent era technologies.
China "owing" for use of technology is a slick argument most usefiul to ...well, full of sound and fury, signifying nothing. History and scientific truth do exist, despite Western misleaders' ignorance.
I was trying to say the same thing but no one got it. At least for you, there are 2 observers who are seeing what you're saying.
The Western world, under the guidance of US citizenism, is built on nothing real, except farming the poor and extorting the weak.
I am not an engineer, but I would imagine knowing how to build things, I mean the entire process from end to end, is the greatest single advantage they now have.
They now have a huge army of engineering people who simply know how to build very modern state of the art things. Those people are going to dream up how to build new things. Many of those things will be geared towards the wishes of Chinese consumers.
So the next question is how creative and resourceful are their engineers going to be. Are they going to remain in copycat mode? How quickly will they advance creatively?
To this I would answer look back at Chinese culture. They have the ability to create when they are open and interacting with the world at large. However, they also have the ability to be their own worst enemies. During periods when they behaved inwardly, they stagnated.
At this time anyone who has visited China say 10 years ago, will be floored by how quickly the general population has been globalized. They got "with it" much much faster than Central and Eastern Europe did.
The strategy of insisting on technology sharing as a condition to market access, is for them a very optimal strategy. The rest of the world is exactly what Trump says: a pack of shitty negotiators.
There are ways to compete with this, but the people running the country are either sucking on the China tete or too stupid to be capable of envisioning what the secret sauce might be. Building lots of bridges and roads is not the secret sauce I am afraid.
We need a creative genius in the White House. One who has no master but the future of the country.
Chinese and other foreign engineers lack one very important attribute, they can't think outside the box. Their training is quite rigid and inflexible, with the emphasis on aquiesence and harmony rather than challenging the status quo.
US engineers kick their ass in the field and practical application.
Those sound like famous last words.
A term I found out early in my carrier was "built in obsolecents". This is what has kept us going for decades. It did not matter what you bought or how well you maintained it eventually it would not work due to pearishable parts not being available (spark plugs no longer made) or just nobody wanting to service the product.
There was also the twist of Intel having 5 generations of MCUs in the safe but only slipping older stuff out to keep the future flow of going with their designed in obsolecents.
China, whether they are doing it intensionally, has this in many of their products. Simple stainless steel bowls develop holes in them in a short time. I just hope I did not eat the hole.
New car wants has gone from 16m to 10m and we are still functioning.
Chinese lords like to be chauferred around and this is the same as the old british lords and the american carpet baggers.
History repeating itself only at a faster pace. Sit back and enjoy the show.
My hot water heater got wet two weeks ago, it stopped working. WTF does that tell you?
Think about this for a moment.
The true story is if China was allowed to export cars to the west it would
Put the western car industry out of business .
The car company's of the west have to assimilate Chinas car industry before China can introduce cars to the west market.
Have any of you seen the copy cars of China?
I suggest you google it to see that $50.000 cars can be made for $29.99 and sold at K mart!
Now, now, stop comparing BMWs with dinky toys made from kinky recycled plastic. Remember that Chinese toothpaste has funny things inside it!
Get real my frend china doesn't just make bamboo umbrellas any more
riiiiight!....but I have a problem with your math!
$29.99? Just a figure of speech, you follow.
The point is the western car company's need a foot hold in China.
...We need a creative genius in the White House. One who has no master but the future of the country. ...
WB7, you will be labeled as a central economy shill if you say that at ZH! Since when does a US president decide the future of the economy?... Creative geniuses in the US tradition are Oligarchs, true blue Americans, like JDR and HF of old and Steve J and Bill G today...
FDR, under extreme duress, created the modern financial architecture of the world at BW and then RN and RR took it all apart. The recent RR video speech at BG nomination in 1964 showed us what a "good talker" was RR! Superb delivery, right tonality...But history tells us what a disaster his financial ideology as PRACTICED over thirty years left us as legacy, to the USA and to the world. We are paying the price today, all of us. The world of the Oligarchs, of private sector dictators, is not the ideal world dreamt up by RR in 1964...far from it.
A philosopher king as POtus? A Marcus Aurelius cum Augustus? Even a Philip Augustus? More likely a Carcalla will succeed current incumbent, Septimus Severus of partial african origin, like the original model.
At this time anyone who has visited China say 10 years ago, will be floored by how quickly the general population has been globalized. They got "with it" much much faster than Central and Eastern Europe did.
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
That is because they have better state institutions.
Response and success in this global world is directly functional to the state efficiency.
State efficieny is nearing in the western world, closer to negative returns every day.
That is why US citizens want to ban the State, because they no longer benefit from it as they used to and now other countries have in much better situations to benefit from improving state institutions.
I just came back from China.
They are kicking our asses over there!
That's because they build real cars.
The Chinese don't have any genes for innovation because they only know how to lie and steal. Say No to the Chinks!
Rubbish.
I remember a previous generation of shortsighted fools saying exactly the same things about the Japanese, in the 1960s and 1970s. "All they can do is copy."
Visited Detroit lately?
You toothless inbred trailer trash should get back to fucking your sisters in the doublewide. Use some protection so we don't get another generation of inbred rednecks
I bet there is no chink out there on the chinese ripoff version of zerohedge calling another chink a racist. Go fuck yourself.
China is working on a 100 year plan of world domination. The Western companies that give their technology to this country in exchange for short-term profits are dooming the west. It's great for the CEOs, who get big bonuses and quit in five years. Not so great for everyone else.
China is working on a 100 year plan of world domination.
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
They dont care about world domination. Their main goal is to keep China together.
And I hear they are failing at even that.
Maybe sooner than 100 years
Anyone expecting to profit on the alleged China bailout of Italy while NATO invades Libya to push China out may have a margin call sooner rather than later
Problem is that they've been working on that plan for 1000 years.
china has ruled the world as the largest economy for all it's history except the last 200 years, they have been biding their time and plotting their inscrutable revenge for the way they have been treated by the west during the last 200 years.
to the dumbass who junked me for using inscrutable as an adjective, you miss my point. the chinese are only inscrutable because the arrogant west has never felt anyone in asia is worthy of being understood. so when they don't sct western or try to conform to western ways asians are inscrutable. well, sometime this century, would it be fair for the chinese to describe new york bankers as inscrutable because they don't act chinese?
like japan, south korea, taiwan and india have done before them, the chinese have invested much effort in understanding usa and euro ways. the usa nad eurozone have invested nothing, relatively, in understanding asia. they have(will) pay dearly for their ignorance.
The Diamond Age: "The house of the venerable and inscrutable Colonel", aka, Colonel Sanders, venerable because of his white hair and goatee, and inscrutable because he managed to keep his mix of 50-some spices secret.
Who cares? China's restriction of foreign imports hurts Chinese consumers the most. Let them reap the benefits of a command-and-control economy.
If foreign companies CHOOSE (yes, it's communism, but it's not coercion) to give up their IP to Chinese manufacturers in order to gain access to that market, they deserve the resulting competition. In fact, we should welcome this competition. Cheaper goods = increased quality of living. The Chinese did this very thing with Haier. A defunct refridgerator company partnered with German appliance manufacturers, used their technology and processes, and made high quality white goods at rock-bottom prices - now they're the biggest white goods manufacturer in the world.
The ignorant American consumer has a smile on his face when he carts home his $150 wine fridge from the local Best Buy, but then curses the Chinese because "THEY TOOK OUR JOOOOOBBS". You can't have it both ways.
Yes we can have it both ways. That's why we're called Americans.
Its everywhere, really, the same type who goes to Wally World and buys whatever it is because it is "CHEEPER" there, then laments when somebody comes along and takes their job for less.
I work in the construction industry and saw it all the time. The "durn furriners takin our jobs" (another debate about illegal immigrants for another time) were usually the first to threaten to drive across town to buy a 2x4 because it was a nickel less someplace else.
Call somebody with that attitude on it, say, "hey, there's somebody who could do your job for less, what off that?" and the typical response is indignation... but 'tis the same attitude that drove a lot of jobs.
I'd rather have a job, than a cheap wine fridge. fuck china, revoke most favored trade status and reinstate tariffs.
Were you looking to start a career in the booming textile or household goods industry? Because goods those comprise the bulk of our imports from China.
Imports from China are actually fairly marginal in terms of American consumption. Only 2.7% of US per consumer expenditure is met by an import from China. Will that number grow? Yes. It has for the last 50 years in every Western country. And along with it will our standard of living will grow.
America always needs a foreign boogey-man. It used to be the Evil Dragon Japan that was going to do us in with cheap TVs and high quality cars (those bastards!!). Now it's the Chinese allowing us to buy socks for $.50 (blast my eyes!).
Finally, what is your mechanism be for controlling imports, since we know that Americans prefer cheaper goods relative to more expensive goods? Tariffs (taxes) and the requisite army of thugs and bureaucrats needed to enforce them in opposition to the will of the consumer. And we look down our nose at the Chinese for curtailing economic freedom? Please...
Tariffs. And raise 'em through the roof. Sure the goods are made in China for...but the profits go...well who knows where they go now. The money makes no sense but the jobs sure do. These are great jobs and they're the backbone of a sound economy and not a corrupt one.
Amen, Tell it to our dickhead jobs czar and the sychophant in chief. The fools are giving it away. Wal-Mart will loose in the end as you buy your cat food at Wu-Mart. The Chinese aren't so smart it is just that our leadership is so dumb. We could just show Biden's trip to China on the Comedy Network and have a prepackaged Daily Show. Maybe we can send GHW Bush to vomit on Wen Jia Bao. It's aligned with our leaderships current behavior. Why not take it to the level of the 3 stooges.
Wal mart sells more made in the USA than anyone. They're our biiggest exporter. Just ask P&G--or Fed Ex. The world stops without the American consumer...let alone the American market. Anger the latter God's at your peril. Or any of the others i might add.
What a dumb rant! Its NOT Potus who sold the Potomac to Peking ducks. Its those Oligarchs like Nike and Apple who sold Detroit and Silicon valley to Ho Chin Chao.
Potus is just the current spear carrier for the US oligarchs. Wake up to the real US of A.
Wal-MArt is the left hand of Oligarchical USA whose right hand is Outsourced Corporate Amerika.
Their Mantra : International labor arbitrage. Our private profits, your socialised losses. WS is what WS does.
To disabledvet : The US trade account says it so eloquently. Wal-Mart ins and WM outs....& the balance is...