ALP: What does China mean to U.S. auto businesses?

January 2007

China’s burgeoning auto sector will mean more choice and lower prices for US drivers.  Watch for Chinese vehicles in US dealer showrooms around 2009.  Before that, electric specialty vehicles, construction equipment and busses will compete for business here.  Some have already arrived.

But the real story is about globalization.  GM and Ford made large profits in China while bleeding in the US.  Auto parts suppliers operate cross-border, aiming to achieve maximum efficiency and quality by a blend of sourcing and engineering.  No car today is truly from any one nation.  And China itself is an exploding marketplace, surpassing Japan and Germany, second only to the US in its demand for vehicles.

China represents a double opportunity for US auto parts suppliers.  It is a growth market, hungry for technology and offering a double-digit increase market.  China is also an investor.  Chinese automotive companies are seeking acquisitions in the US now.  We know this from talks with companies throughout China.  Our FK MidAmerican Consultants personnel, with offices in Shanghai and Beijing, advise Chinese companies about the US market, and they view it as a way to diversify, globalize, increase quality and expand.  Chinese companies welcome US engineering and research expertise as they move to world-class status and aim both to meet rapidly expanding domestic demand and to compete in a global market.

Just as Japanese auto companies changed America over the past 30 years, so Chinese automotive business will alter our landscape.  This will be different from the Japanese experience, which was primarily a wave of 1-way investment and marketing in the US.  By contrast, China should offer a circular opportunity, with US businesses succeeding there and Chinese companies offering competitive value to our consumers.