Motoring

Made in China: the rise of an automotive powerhouse

Tesla

Bruce Newton

Posted November 12, 2021

If your next new car is a MG, Volkswagen, or Tesla, did you know there is a good chance it will be manufactured in China?

Australia has seen a massive influx of migrants over the past 20 years, something that applies to cars as well as the people who drive them.

Post-war English brands ruled the roost in Australia before being overtaken by American-owned local manufacturers in the 1950s. This dynasty was short-lived until the Japanese arrived in the 1960s and the Koreans shortly thereafter in the 1980s.

After some false starts and setbacks, the past decade has born a new era of quality vehicles being shipped in successfully from China. 

The MG brand – yes, the same MG that was British-owned and once made sports cars with leaking roofs and wheezing engines – is now a Chinese-owned maker of SUVs and small cars cemented among the top 10 sellers in Australia.

The other Chinese brands sold in Australia include Haval, Great Wall, and LDV - all of which are growing at a spectacular rate. Adding to the incursion, more brands are soon expected to come our way, including electric vehicle specialists BYD and Ora.

Value focus

Like the Japanese and Korean brands before them, the Chinese are gaining sales by improving the quality and equipment levels of their vehicles while undercutting their rivals on price. It’s a combination most other manufacturers either won’t or can’t match. Japanese brands such as Toyota and Mazda and Korea’s Hyundai and Kia have motored further upmarket seeking profit. 

Examples? The MG3 mini-car is the market leader in its segment in Australia with a $16,990 drive-away price. The cheapest Toyota Yaris is about $27,600 drive-away. 

The GWM Cannon dual cab 4x4 ute starts at $33,990 drive-away. You’d have to pay almost $20,000 more for a mechanically equivalent Toyota HiLux with less equipment. And so it goes.

Even if you were someone who never wanted to buy a Chinese car. Eventually, you may not have a choice as western brands are getting into the act.

The first Chinese-built car to be sold in Australia was a Volkswagen Polo sedan in 2004. Nowadays the top-selling electric car in the country – the Tesla Model 3 – has been imported from China since early 2021.

And most of the Volvo range comes to us from China. Yes, Volvo is Swedish but it is owned by Chinese giant Geely.

Growing markets, reducing cost

But how are these Chinese manufactures able to undercut their competitors on price? It essentially comes down to a combination of affordable labour, highly automated and efficient factories, tight control over supply lines and huge build numbers, according to Australian automotive industry veteran Kevin Wale.

“All the big Chinese companies have been building their own cars for 20-odd years now, so it’s not like they just woke up and decided to build a car. They have been through that process of what works and what doesn’t.

“If they want to sell a car in Australia, as long as they get their marketing and distribution right, there’s no problems.”

Wale worked globally in a series of senior roles for General Motors, the parent of now-defunct Australian brand Holden. He capped that working life off with more than seven years as president of General Motors China, working closely with local partners including SAIC, the owner of MG and LDV. By his last year in China, 2012, GM vehicle sales totalled 2.8 million and revenues more than $US30 billion. 

In those days export wasn’t really a thing for Chinese brands, such was the exponential growth at home. But now that market is steadier and it has become more important fiscally and for corporate prestige. Australia is just a small part of a much larger international expansion.

“[The Chinese] want to be larger players, and the only way to do that is selling overseas. Unlike western brands, they are happy to try, fail, and try again. 

“Some are trying to sell in Europe, some are looking at the USA. Some are here in Australia and if you can sell your product here, you still get some decent credos for it.”

 

Volva S90

Did you know that most of the Swedish Volvo range comes to us from China? 

 

Trouble in paradise

Over the past few years, Australia and China’s relationship has shifted somewhat, leading to difficult trade negotiations and tough talk coming from both sides. 

Despite, these tensions, based on sales rates, new car buyers are ignoring the geopolitical posturing for the moment. But if Australia's relationship with China was to worsen, would it impact Chinese car sales in Australia? Wale says no.

“Most Australians – and remember Australia has a very diverse cultural make-up – don’t care where a product comes from.

“Australians didn’t buy Holdens because they were made in Australia, they had no problem buying any car they wanted even though they said they wanted to keep the Australian industry going.

“It all just comes down to ‘is this the car for me or not?’”

Also, keep in mind, the Chinese aren’t the first car-importing nation to cop negative blowback in Australia.

History repeating

Back in the 1960s when Toyota was gaining a foothold in Australia, there was some opposition because of conflicting memories from World War II. An executive at its local manufacturing partner AMI was sacked for voicing anti-Japanese sentiment and when the company raised the Japanese flag alongside the Australian flag outside its Port Melbourne headquarters, it made front-page news – and not in support.

Toyota has still gone on to become Australia’s top-selling brand every year since 2002, evicting Holden from its traditional position atop the market. 

Unless there are dramatic changes to buying habits in Australia, Wale says a Chinese company won’t be doing the same thing to Toyota any time soon.

“It won’t happen in the next 20 years,” he predicts. “I think it’s more likely you are going to get a range of Chinese products to come in and do well in their segments.

“Where that changes, is if Australia makes a big move to electric vehicles - then it’s a whole new ballgame. The Chinese are really committed to leading in that area. 

“Then they could go head-to-head with anyone.”

Is your vehicle protected?
Protect what's important with RACV Motor Insurance →

The information provided is general advice only. Before making any decisions please consider your own circumstances and the Product Disclosure Statement and Target Market Determinations. For copies, visit racv.com.au. As distributor, RACV Insurance Services Pty Ltd AFS Licence No. 230039 receives commission for each policy sold or renewed. Product(s) issued by Insurance Manufacturers of Australia ABN 93 004 208 084 AFS Licence No. 227678.