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.
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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.”
“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.
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.
I’m waiting for the sleeping giant that’s India to wake up and get even more proactive on the world stage. Tata is the worlds 5th largest car manufacturer, building semi to delivery trucks, busses, numerous military vehicles and numerous types of cars, including the worlds cheapest car (about US$1,500) They own Jaguar, Land Rover and Daewoo. Yet we hardly hear about them. Maybe time for our trade department to get involved and send China a message they understand. I personally would prefer to see almost any country’s name on eBay instead of China.
Don’t hold your breath. Modi is more concerned with ridding the place of anything NOT Hindu. The Congress Party has more to say on the ‘border issue’ than does the BJP. The Reps of the Indian parliament are
much more concerned with their respective States than the country as a whole which accounts for Modi’s (political) success!
India only woke up 18 months ago when it realised that the Chinese navy controlled from North Korea to the Middle East. This is what the proposed fun and games is to be all about (with the USA).
The PRC has a bucket full more trade deals currently that Oz will EVER have. As to what you might intend with the phrase “send China a message that they understand” I can’t imagine – and I will leave you to explain it with reference to the relative strengths of the research arms and trade volumes for each (PRC and Oz) country.
I agree concerning India, it truly is a sleepy giant. If, when, it wakes up they could be a major force on the world stage.
Re sending China a message: losing trade is the only thing they’ll take notice of. Several other countries have made similar remarks to China concerning Covid but for China we are the easiest to push around.
There is disquiet in the rest of the world over China’s bullishness, so it’s not too hard to imagine a general backlash, and the only thing will make a difference to China is if trade deals start going elsewhere. Apple, Tesla, etc could just as easily set up in India.
Apple is not going anywhere. Read its own correspondence on the matter and similarly or others for the same reasons. I have pointed out that setting in in India (1) isn’t a realistic option just on infrastructure alone (2) so say nothing of its own internal problems.
What annoys the hell out of Donald, and hence the treats to funding, is that the UN (mostly 3rd world) is very pro the PRC because the PRC (for its own reasons) is in there with its sleeves rolled up. Hitherto, the USA controlled the UN but that is becoming much less the case nowadays. Even the WHO has bets each way.
I don’t intend to be provicative but who gives a damn over ‘disquiet’ ? The USA has contended with ‘disquiet’ since the USA embargoes over the Carribean over the last two centuries. We have a “real” situation to contend with Bref and the consequences could be severe.
FB is for friends. Trade is (as it has been remarked upon by others over the centuries) ‘the art of the possible’.
A comment in an article in the Thin Review, yesterday;
“I get politicians now asking me ‘why don’t you just go to India?’ Oh my God they have no idea. India has 30 per cent tariffs”
Said by;
Fletcher International Exports founder Roger Fletcher, the biggest sheep meat exporter to China, who is;
“..enraged at how out-of-hand the tensions between China and Australia have become.”
Article is headed;
‘Just shut up’: Export giants slam handling of China relationship
And, they ain’t just p***ed at the pollies;
“I just wish everyone would shut up,” Mr Fletcher said. “If the Chinese pull the plug on this I’ll be very angry at journalists and governments.”
Believe it or not my reply to Bref, above, has only been just released by the Thought Police.
From what I have physically observed in India the place is going backwards and at quite a rate of knots. In the mid 90s in Bangalore I found myself chatting (over dinner) with a group of females (mid to late 20s) who worked as BlueTooth coders (programmers) for various companies selling such gadgetry.
Their biggest issue, it seemed, was finding an intelligent guy; so they conveyed but not in as many words.
The ‘guys’ preferred only early to mid-high school educated females; apparently. That is not the punch line.
About 15 years later a similar situation occurred but only with one female who was joined, later (arranged to meet), by her friend. As her friend arrived, a couple of guys blurted in Hindi as to what the hell they thought they was doing talking to a foreigner whom their families could know nothing of. Different huh?
Ok cabling. I have a background in network and telephone design (yeah : I have had a few careers) . That the cabling works in India is the 8th wonder of the world! It can be a but rough in the PRC too but the administration of the telecom companies is a LOT more organised.
I could add 1,500 hundred words effortlessly at this point. Anyone who suggests a switch to India from the PRC does not even have a primary school comprehension of geography or social studies. I can’t place my finger on it but it seems (under Modi) that the palce is imploding into domestic issues (by State) with diminishing National consciousness. For my bob’s worth, the social issues are also getting out of hand. The population is out of control (anyone remember Indira Gandhi)?
Keane OUGHT to develop this trend because it amounts to the definitive example of a Front Bench NOT having the least clue as to what game it is in over the PRC.
I do believe it!
Any ‘conversation’ about India’s prospects cannot avoid the sellout to ‘BigAg’. The GMO seed ‘process’ alone has seen enormous numbers of small farmers resort to killing themselves, once they’d twigged to having no prospects, themselves.
Modi’s ‘style’ of nationalism (Hindu ‘extremist’, for want of a better term) cannot result in either cohesion, or prosperity.
The world should hope that whenever there’s a yike on the India/PRC border, they both maintain enough sense to head to Moscow for a little ‘mediation’, as they did a month or so back.
My subsequently reply to Bref (refuting, politely, his revised assessment) has also been embargoed. Taking a view 180 degrees to the author of the article concerning Pauline’s gift (today 10 Sept.) has received the same treatment.
I have my share of mates/associates who reckon themselves informed when, at best, their ‘experience’ is no better than what they have seen on a ‘Doco’ channel or a ‘History’ channel. I think it would be fair to say that the ignorance of the common elector is greater when it comes to India compared with that of the PRC.
Your description of Modi’s ‘style’ has been reproduced in ‘The Hindu’ (no less) so that is a ‘hole in one’ for you.
Modi is deliberately confrontational which is actually scoring points among the harder-line Hindus.
As to your last paragraph, David, I think the matter is very much broader than that. The Pakistan-PRC nexus is fairy strong (anti Muslim anyone?). Modi has said damn all in regard to the border stuff; at least noting intelligent.
Again, I can’t put my finger on it but it seems to me that Modi (on a campaign best known to himself) wants a greater piece of the action from the Silk & Belt. The BRIC stuff is one thing but Kashmir is quite another; at least to the PRC. Damned murky.
This is one occasion when I do hope that I am wrong but I can foresee the PRC bringing down the sword over India and Oz and the USA by the (PRC) National Holiday.
I forgot to add. Maybe, just maybe this is the time to copy a decent education system from another innovative country and apply that for 2021. Singapore would do with some modifications.
A test as to the student’s fitness (not automatic) for high school ought to be applied (as it was in the 1930s) with progressive tests at the end of each year. There will be a lot of failures and few prizes but a Silicon Valley under such circumstances is possible within a decade or so.
Simultaneously, revise funding to major institutions such as the CSIRO but NOT necessarily to universities – long story. Fifty years ago the matriculation exams were set so only 5% percent of the population (the top 5%) attended a university.
Reset TAFE to where it once was and not as a certificate distributor to the unemployable.
The presumption of ‘she will be right’ isn’t working and the evidence *is* the scratching about for an alternative to the PRC. The smart move would be to act independently and seek a cooperative relationship with the PRC in conjunction with a decent education system. Otherwise, accept Lee Kuan Yew’sprediction of a a ‘white trash’ country.
I can certainly agree with your comment regarding TAFE. Great insight ‘certificate distributors’ indeed. Accurate description. I’m in the know.
Thats how its been doing for the last 10 years despite the efforts of some really talented and inspiring Teachers (oops Trainers) General quality of students is very low and so are their reasons for being there. Job agencies pushing so many into courses they are unsuited for. Such a waste of money, time and effort on unmotivated students (sorry Learners). A bit more stick rather then the carrot for these malingerers would help.
It did not used to be like that. It worked very well. Competency Based Training is the cancer.
The system (TAFE ‘n Varisty), to the mid 80s, had undeniable holes but it was functional and it DID produce a product.
TAFE was sacrificed (30+ years ago) to ameloriting the dole queue. Interesting that EVERY CEO at a State Dept. Ed recongnises a ‘crisis’ (their world) in literacy. It was not the case 40 years ago. Ergo, the ‘new’ system, which clearly isn’t working, OUGHT to be halted in its tracks by Monday.
As for perverting the language : THAT is just were we ARE nowadays!
Ban all Chinese Imports not just Cars. Yes China will not buy our products but we can not be held to ransom!!