The US Auto Industry Drifts Off To China

Wolf Richter's picture

Wolf Richter

Though practically every car sold in the US today contains Chinese-made components, the announcement that a few Chinese-made cars would arrive in Canada raised a lot of eyebrows. It would be a Honda Fit assembled in the same plant where the European version, the Jazz, has been built for years. But Chinese-designed and branded vehicles have not made it yet. Chinese automakers, of which there is a whole slew, are scrambling to improve their technologies from nice-looking but shoddy copy-and-paste models to reliable products that would be competitive in developed markets. It’s a government priority. And they’re getting there through the back door.

China's automotive market, with new vehicle sales in the 18-million-unit range in 2011, has leapfrogged the US market with its 12 million units. Some analysts estimate that sales will reach 28 million units in 2017 (highly optimistic if the China bubble blows up before then), and no major automaker wants to miss out on the opportunity. They all have invested heavily there, though the National Development and Reform Commission is pushing foreign automakers to share more of their advanced technologies with their Chinese partners—and they all have to have Chinese partners.

The push to develop new technologies is immense. China has already outdistanced the US in published patent applications, according to a report from Thomson Reuters, though it is still lagging behind the US, Japan, and Europe in patent grants. The surge in applications is in part due to incentives that the government is offering in its amazing effort to push the country up the industrial and intellectual food chain to where products are designed from ground up in China. Targets: pharmaceuticals, technology, and ... the auto industry.

Developing technologies in China is one way. Another way is to go shopping in America. And in most cases, government-owned enterprises are behind it. For example, BeijingWest Industries. The joint venture of three government-owned companies—Shougang Corp, Bao'an Investment Development Co., and Beijing Fangshan State-Owned Asset Management Co.—bought the chassis division from Delphi Automotive during the crisis in 2009. Building on Delphi’s technologies, it now develops and manufactures brake and chassis components for a variety of US and European automakers.

Delphi embodies what’s wrong with manufacturing and financial engineering in the US. In 1999, when GM spun it off, it was a mega manufacturer of automotive systems. In 2001, the company cut 11,500 jobs. In 2004, it got into hot water over its accounting practices. In 2005, six years after its IPO, it went bankrupt and closed 24 plants. In 2006, it closed another 21 plants. Throughout, GM began to source its components elsewhere, particularly in China.

Visteon, Ford’s version of Delphi, is another example. Visteon designs and manufactures automotive interiors, lighting systems, climate control systems (second largest supplier in the world), and electronics, including driver information, audio, and powertrain systems. When Ford spun it off in 2000, 80% of its revenue came from North America. In 2009, nine years after its IPO, it went bankrupt and closed numerous plants. While the “reorganized” Visteon is still a primary component supplier to Ford, it now supplies other automakers as well. Its center of gravity is shifting to its Asia Pacific Corporate Office and Innovation Center in Shanghai. And the building of its North American Corporate Office and Innovation Center in Van Buren Township, Michigan, is up for sale.

Already, Visteon is consolidating its interior systems into Yanfeng Visteon Automotive Trim Systems, its Chinese joint venture with Huayu Automotive Systems, which is a subsidiary of China's largest automaker, Shanghai Automotive Industry Corp. (SAIC), which is owned by the Chinese government. And now analysts believe that Visteon may also merge its electronics entities into Yanfeng and sell its 50% stake to SAIC—hence, to the Chinese government.

To match quality and design standards of the best in the world and to become competitive in the US, Chinese automakers can't rely on copying existing technologies. They must learn how to design, engineer, and manufacture vehicles from the chassis up. And to accomplish that, China is weaving a matrix of companies with state-of-the-art capabilities, both in China through its joint ventures and overseas through acquisitions.

The most visible acquisition occurred when Zhejiang Geely Holding Group bought Volvo Cars from Ford in 2010, but the most significant movements are happening in the components sector where much of the unglamorous engineering and manufacturing work takes place. Clearly, China has set out to conquer the global automotive markets, but not by trying to flood the US prematurely with Chinese-branded vehicles.

The US trade deficit with China will hit $300 billion this year. It’s politically convenient to blame China’s yuan policy. But the driver is an enduring strategy by US corporations. And now a trade war has broken out.... The Trade Debacle With China.

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imwilliam's picture

Changes do take place in every industry. What car owners want is something that is of good quality. A good car ensures safe driving. But car owners also have top be careful. Getting low quality car parts would not do. For vital information on car and car related issues you could try its very informative.

rajonmestra's picture

Oh not Honda Fit, this is my favorite model from Honda. But I guess owners or consumers should trust that Honda would be a reliable automaker company that whatever or wherever they manufacture such Honda Fit accessories, it is a reliable and dependable vehicle.

kall's picture

If I was an auto manufacturer in US I would pay attention to each China move You’re right, I also have the sense that they are entering the auto market back door and that’s now the landscape I want to see for my country. I really don’t trust Chinese quality, I am thinking about checking with my car insurance Ireland and verify the safety levels for the cars that have Chinese manufactured pieces.

nahshal's picture

What aberration alone three years can make: in 2009, U.S. sales had biconcave to their everyman point in the endure 25 years, while sales in China were accretion exponentially.


mensagens para orkut

ozziindaus's picture

 "And now a trade war has broken out"


Nothing of the sort will break out under this corporate/treasonous political regime we live in. Wall street is too highly invested in the emerging markets and, at the expense of the US standard of living, will not allow them to fail.

Once the average US salary and living standard matches those in the developing nations, then and only then will manufacturing return to our shores. Disturbingly, the renaissance will be orchestrated by the same mother fuckers that destroyed it in the first place. They will take credit and of course profit from it. 

The answer is to front run the banks and multicorps and pull all investment out of emerging markets before they quietly hit the exits. Let them eat their own shit while they deceitfully and desperately try and sell us the endless growth dream abroad. Let them be prisoners of their own mal-investments and this time , NO MORE BAILOUTS.

CTG_Sweden's picture


I´m not so sure that China depends on buying foreign OEM suppliers and foreign automakers in order to improve quality. South Korean automakers didn´t have to do that. Perhaps they will improve quality somewhat faster by acquiring companies rather than study high-quality products from Japan and Europe.


I think that Geely bought Volvo because China is a big market for up-market brands. The Chinese government probably supported this acquisition since the Chinese balance of payments improves if they have to import less up-market vehicles and send less profits for China made foreign brand vehicles abroad to foreign parent companies due to dividends and internal pricing.


NEOSERF's picture

So basically the trade war is/has been US Political Establishment vs. "US" companies who basically own the US Political Establishment...this will go well for taxpayers...

Stuck on Zero's picture

Oh yeah.  The U.S. government has an automotive policy, too.  Yesiree.  Destroy all U.S. jobs send them to China and print dollars to cover the difference.

DaveyJones's picture

you could have dropped the last two words in your headline

(it was meant as a comment on the US auto industry, not the writer)

f16hoser's picture

China was Bill Clit-ons #1 campaign contributor if memory serves. I'm sure what we're seeing was planted during his administration....

prole's picture

You don't have to go far into a NYT article to get to the first blatant lie:

"<quote>The cars, in fact, are not even from the myriad Chinese automakers whose North American ambitions have been stymied by inferior quality and sometimes laughably poor performances in crash tests.</quote>

Their North American ambitions are only stymied, you fvcking son of a bitch liars, by the fact that the US .gov won't let the cars in.

Fiat: "Hey can we send you some triple overpriced POS small car that nobody will buy?"

Feds: "You bet!"

China: "Hey can we send you these sweet small cars? They cost about 4,ooo US, get 50 miles per gallon and people will swamp the dealers to get them first?"

Feds: "No.  Attach ten thousand dollars worrth of gadgets to each car, multiply the price times 5 and get back to us."


At the end of the day, China, like Korea will only send to the US a line up of Toyota clones. BFD we already have ten companies doing that already.

Daewoo Tico, Nissan Micra, or any car that might actually be practical in the Orwellian Nightmare parking lots called american "roads" not on the menu.

Non Passaran's picture

chinese car crash test video
Search for above on YouTube and enjoy your theories.

Bicycle Repairman's picture

There has never been a free market in automobiles in the USA.

Bartanist's picture

... and maybe this is simply the fulfillment of a promise and a payback for previous wrongs. The Chinese are being given US dollars which then can use to buy back their own gold, in a way that is opaque to those who are not privy to the purported secret history.

Dollars are the equivalent of toilet paper and so there is no loss in trading them for metal.

gina distrusts gov's picture

"Dollars are the equivalent of toilet paper and so there is no loss in trading them for metal."

Partially true  at least as far as swapping them for metal .

Scott wipes are much more valuable than a dollar at least the arse wipes do what they are suppose to do the dollar is naught more than a mechanism to steal from people with.

KickIce's picture

I smell desperation.

falak pema's picture

Forced economic paradigm change and redirection of an aircraft carrier type economy is never a happy compromise. It hurts baaaad, saying "abandon ship" to the crew of aircraft carrier...

pine_marten's picture

I remember looking at Triumph's back in the 70's when I was a young man working in Chicago.  Bought a Honda motorcycle instead.  Did not buy a new car until the late 90's.  Did that three times and wisely went back to used cars, Toyota Camry's.  Don't think I'll ever buy a new car again.  With gas prices through the roof and income down, mobility and the freedom of the open road are nostalgic memories.

onebir's picture

I went to a Chinese auto show in 2009 in Changsha. I was just blown away by the sheer number of Chinese auto manufacturers that I'd never even heard of.

But many Chinese cities have already gone from empty streets to gridlock in less than a decade, & continue registering thousands of cars per day. Even with the subway systems many are installing, they'll just choke to a halt if the trend continues.

I think some would even choke to a halt if the ghost real-estate developments ever get occupied. After all, taking the bus to work will be beneath people who've spent x million RMB on a fairly but not quite central apartment...

Subways won't cut it - they'll need to introduce road-pricing schemes in very short order in many major cities. Then cars suddenly become much less attractive and the govt is left holding the bag for carmakers or engaging in a trade war to try to get them into other countries where govts are already holding the bag for car makers.

Collective insanity at its finest.


Seer's picture

I'm thinking that this was the secret weapon in killing the communists... force them to adopt the ultimate unsustainable growth meme.  Obviously the Command Economy failed to grasp that it's fucked, that it made itself heavily dependent on energy imports.  Not the first one to do so, but perhaps the last...

The Skittles and Unicorns show coming to a town near you soon: abiotic oil and "electric" vehicles to save the day!

Taint Boil's picture

....... and "electric" vehicles to save the day!

Chevy Volt is a scam

El Gordo's picture

Here's an early release of the latest overseas styles approved by the Obama administration for import into the US.  Meets all approved gas mileage and emission standards, and utilizes the latest efforts to improve on the domestic unemployment problem.  A can't miss, ground floor opportunity if I ever saw one.


non_anon's picture

ha ha, memory lane for a lame auto industry movie, 1986 movie called "Gung Ho", before the Jap bubble popped

about forgot this gem

Detroit Auto Workers Busted on the Job Drinking Beer & Smoking Pot on Break.

sethstorm's picture

China never innovates, they just copy or get someone else to do the hard work.  Trade war is a necessary action to stop them - even if it is ugly.

By going with China, the quality goes out the window.  If you want to complain about Detroit's manufacturers, your complaints should be addressed to the shoddy practices of China's (and other like-minded hellholes) manufacturing.


DaveyJones's picture

you might want to check your history book and see what China has invented over the centuries. Another reason empires go down is arrogance.

sethstorm's picture

I have.  China's more likely to give you something that only has the appearance that something is there.  

The US actually delivers the product.



Bartanist's picture

You believe an old and antiquated stereotype.

IMO, the truth is that all up-and-coming people/economies copy the state of the are and then produce it at a lower cost than the those economies that are tied to an aging infrastructure. However, there is no inherent deficiency in the Chinese people. They work hard and are innovative. It is also a truism that innovation follows manufacturing ... for the simple reason that, that is where i is needed to best impact the competitive environment.

Consumers are not innovators. Producers are innovators.

AnAnonymous's picture

China never innovates, they just copy or get someone else to do the hard work.


An evidence US citizenism is spreading in China. Chinese invented stuff. Now by the words of that US citizen,Chinese have adopted the US citizenish approach.

Copy, get someone else do the hard work, use your larger market to impose your own brands over innovative people's brands.

US citizens from US of A have proven to be such copy cats.

Somebody remembered the Rolling Stones, The Beatles (improperly pronounced in the US of A) or Led Zeppelin?

All good english speaking bands that should have passed with ease the 'cultural' barrier (okay, MickJagger 's thick lips makes him look dubious to your typical US citizen of A and their inherent hate of the negro but the rest?)

You could spend one hour listing all the bands that were US brands, copied out because US of A people want their brand to dominate.

The monkeys, Hearts and so on... All inferior versions that sold better than all the great bands they wanted to copy. Communaulism (communauty spirit) at its best.

SO yep, one understands US citizens of A fearing the spread of US citizenism to China as the article points, China market is adequate to apply the US citizen policy:

-use bigger market to put out of business innovative solutions

China, US citizenism is conquering you, as usual, for the good sake of Humanity (US citizens never act for their own benefit, only for the benefit of Humanity so their propaganda says)

Seer's picture

"China never innovates, they just copy or get someone else to do the hard work."

Nothing like the US's big innovators, the financials...

Anyway, what real value is "innovation" if it locks you into a meme of unsustainability?  Please, can I just have a little bit more crack? it'll work out just fine...

JohnG's picture



Thank you Tyler.  War's and such scare me greatly.  It's THE LAST event the world needs.

JohnG's picture



So here I am, talking to myself.....

Seems a pitiful statement.  Everyone on the war thread.

Try to relax folks.  Nothing to be done.  What wll happen will.

I give up.


I'll grow my garden (when it gets warm again) , talk to my dogs, and watch the trees grow.


Just live.

Taint Boil's picture



So here I am at 5:00am talking to a guy who talks to himself - rock on bro.

Fiat 500 line framer in dry cycle (no car). Quick video to go with the Fiat ads on the side bar, tough car by the way.

Nothing is made here anymore (video from Mexico) but life is good, plenty of work outside of USA in third world countries.