China keeps getting better at making cars. One reason: It’s getting better at cutting corners. Zhejiang Geely Holding Group Co., one of China’s biggest car makers, conducted 20 to 25 crash tests when it developed its popular Panda model, engineers involved in developing the car told Reuters.
Global car makers typically conduct 125 to 150 crash tests for each new model. By relying more on computer simulations, Geely saved at least 200 million yuan ($31.57-million U.S.) and two years in development time on the Panda, the engineers said.
Paring back on crash tests, skimping on frills, simplifying designs, using cheaper materials and, in a departure for the industry, outsourcing most of their design and engineering are having a profound effect on the cost bases of China’s dozens of car makers. Some are now able to sell cheap and cheerful small cars for about 40,000 yuan ($6,350) – less than half the price of a plain-vanilla Toyota.
Ten years ago, no discerning Chinese consumer would have bought China-designed cars. Not only were such vehicles accused of being illegal counterfeits of foreign models, but their quality and safety were also mistrusted.
Now, despite their homely looks, some indigenous models are striking a balance between no-frills affordability and acceptable quality. In China, it is the age of the good-enough car – and that has potentially significant implications for the world auto industry.
Models such as the Panda and the Great Wall Haval H3 are becoming popular not only in China but increasingly so in emerging markets, from Indonesia to Egypt and Ukraine. They are driving China’s auto exports to record levels, even as growth in China’s auto market slows down.
Exports of Chinese-produced vehicles are forecast by China’s auto association to hit one million vehicles this year from 849,500 vehicles last year. Some automotive analysts are predicting a 50-per-cent increase to 1.25 million vehicles.
Some executives at big foreign manufacturers say China’s new model of creating good-enough cars poses a serious challenge to the way the international industry operates.
“This is a warning shot to the established engineers who have told their management time and time and again that this is the minimum cost they can achieve with their existing design and production methodology,” says Shiro Nakamura, a top Nissan Motor Co. executive and the company’s chief designer. “Now the Chinese are saying they can cut another 30, 40 per cent of the cost.”
It normally takes four to five years for established players like General Motors Co. and Toyota Motor Corp. to come up with a new car from the ground up. Chinese manufacturers can now do so in just two and a half years by deploying an abbreviated design process.
“Perhaps the Chinese achieve their low cost by sacrificing quality standards,” says Mr. Nakamura. “But in many ways their way also points to ‘over-quality’ or ‘waste’ we have built into our conventional design process over the years.”
The Chinese approach is a product of the extraordinarily fast rise of its auto industry. As the country opened up to the West, car makers were faced with relatively poor customers at home and sophisticated products made abroad. Global auto makers could sell their pricey cars to rich Chinese, but local Chinese auto makers had to come up with cheap cars for the masses.
Rapid growth in the economy spurred the creation of more than 100 registered auto makers across China by the early 2000s – but they lacked expertise. Their solution in coming up with affordable cars was simple: Copy the designs of foreign makers.
“Around 2000, China began embracing an approach it described as ‘reverse-engineering.’ It was essentially a fancy word for copying,” says Dai Ming, a senior engineer at CH-Auto Technology Corp., an independent design and engineering company based in Beijing. “The problem with those copied cars was that the Chinese were able to emulate the shape of a foreign car, but not its soul.”
Chinese car makers tended to sift through a foreign vehicle to identify expensive, non-critical features and functions to skimp on or eliminate, such as a door that closes with a proper “thump,” as well as power windows and passenger airbags. The result was often dubious quality and durability. After a few years of use, bumpers and door handles would start falling off.