Cheap Chinese cars may deal deathblow to Australian assembly industry

MEDIA RELEASE - 09/03/2009

Chinese cars could deal a deathblow to the Australian car assembly industry, says the car buyers’ Dog & Lemon Guide. Editor Clive Matthew-Wilson, said today: “The Chinese car industry is in trouble and the only way it can get out of trouble is to export to soft targets like Australia.”

“China’s car industry is largely controlled by people with strong links to the Chinese Communist Party. The Chinese car industry isn’t just a way of making money, it’s a way of providing jobs at a time when the Chinese economy is in trouble.”

“The Chinese car industry will sell cars at a loss if it means protecting local jobs. America and Europe can retaliate against this, but Australia can’t. Australia has around twenty million people. China has nearly a quarter of the world’s population. China is also Australia’s largest trading partner, and China would quickly retaliate if there was any attempt to block Chinese cars.”

China’s car industry is now larger than Japan’s, and is on track to produce ten million cars a year. However, China is rapidly running out of customers for its cars. The Chinese government has already warned that the Chinese car industry is about to face a 'financial tsunami'.

Matthew-Wilson believes that negative news from China can generally be trusted, but he warns about trusting positive Chinese government figures.

“Right now, the Chinese government is desperate to halt the tide of panic within China. You can be sure that most official figures will be deliberately optimistic in order to hide the full extent of China’s crisis.”

China exports most of its fully assembled vehicles to Russia, Ukraine and Vietnam, but customers in these countries have suddenly stopped buying new cars. China’s Great Wall Motor saw its sales to Russia drop by 40% last year.

At the moment China’s car industry is being kept alive by sales within China, but the Chinese economy is heavily reliant on exports of all kinds and domestic demand for cars is dropping significantly.

Matthew-Wilson believes China will shortly begin a massive export drive into markets that are relatively prosperous but lack the economic clout to block the Chinese.Ateco Automotive plans to launch Chinese-made Chery and Great Wall vehicles into the Australian market this year.

“The first Chinese cars are likely to be rubbish, but they’ll be cheap and they’ll get cheaper as volumes increase. Even if the Chinese cars don’t initially sell in large numbers, they’ll drive the price of other cars down. Few car companies globally are making any money even now, so the rise of Chinese cars will cause the fall of others. The Australian car assembly industry, which is already losing money on every car built, is an obvious casualty. Not only will Australian cars be competing with Chinese cars in Australia, but they’ll be competing with Chinese cars in crucial export markets.”