No free kicks

The Chinese automotive industry has been likened to a virulent infection. With help from foreign car companies setting up manufacturing plants to take advantage of cheap labour, the Chinese will be able to export cheaply-built cars and swamp automotive markets all around the world. So we're told.

The reality is actually somewhat different, according to Doug Dickson, Mazda Australia's Managing Director.

Mazda currently builds a Mazda2 sedan in China, but that car is unlikely to come here. There are a couple of reasons for that, including its inability to comply with ADR safety standards.

Principally however, Mazda does not want to bring it here. Despite the fact that it could compete with the Toyota Yaris sedan, Mazda will not consider the '2' sedan for any market other than China.

"To export to other markets, you're basically giving your Chinese joint venture partner a free kick," Dickson explains.

Every foreign manufacturer opening a manufacturing plant must undertake to join with a Chinese-owned partner in the venture. With the Chinese partner entitled to half the profit of vehicles exported, it's unlikely a foreign manufacturer would export from China when most companies are juggling a glut of production capacity elsewhere.

In effect, the bureaucracy of Maoist China is in conflict with the central tenet of western capitalism -- profitability.

Dickson tells us that Chinese brands gaining a foothold in markets such as Australia are more likely to be independents, such as Brilliance (more here), Chery (more here) and Great Wall Motors (more here).

The danger for those companies is that they must shoulder the cost of R&D for foreign consumption. And their distributors in those markets may find that the landed cost of Chinese cars is not as cheap as they had anticipated, once the cars comply with all local statutes.

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