Not so fast: The rise of Chinese cars

Already, Great Wall Motors has carved itself a sizeable niche with utes and SUVs. In less than two years in Australia, Great Wall Motors has pushed Volvo out of the top 20, and so far this year has outsold Isuzu, Lexus and Peugeot, to name a few.

Fellow Chinese brand Geely is off to a slower start; imports of a small hatchback began in West Australia but distribution is spreading east.

Neither of these brands should be dismissed, particularly as they’re being looked after locally by importers with proven track records. The people responsible for bringing Great Wall Motors to our shores, Ateco, previously distributed Suzuki, then Kia before their parent companies set up shop locally. The company currently also imports Fiat, Alfa Romeo, Ferrari, Maserati, Lotus (just added) and Citroen.

Geely’s distributor, Perth-based multi-franchise car dealer and entrepreneur, John Hughes, introduced Hyundai to Australia in 1986, under the banner of the Bond Motor Corporation. When Alan Bond's financial empire folded Hyundai remained, distributed by other companies until Hyundai took over direct distribution in October 2003. Until recently Hughes was still one of the single biggest Hyundai dealers in the world.

So, both these distributors know how to nurture small or emerging brands and are accustomed to dealing with growing pains. For example, they know that price is king, and to keep the model range simple.

They’re also aware of the risks of dealing with an unproven brand – and the importance of keeping customers happy. So, from the sale of each car, they set aside slightly more money than they would for a car wearing a more established badge, to deal with the likely higher rate of warranty claims.

Fellow Chinese brand Chery (also distributed by Ateco) joined the crowded Australian new-car market in recent months with a small hatch and small SUV. Other Chinese brands are due to follow.

While there is no doubt Chinese cars will find sales success in Australia, what we're all keen to know is when they’ll become decent cars.

Chinese cars' price advantages have largely been blown out of the water by Suzuki and Nissan in recent months after they matched or got very close to sub-$12K RRPs with better made, safer and better equipped models. However, where the Chinese do have a significant price advantage is with their utes and SUVs.

But as the saying goes, you get what you pay for. In my experience they’re still quite rudimentary and, in some cases, unfinished.  Indeed, they may have attractive luxury features such as leather seats and alloy wheels but significantly they lack such safety features as curtain airbags and stability control. Problems such as ill-fitting cabin materials and engine flare or overrun between gear-changes (a sign that the engine has not been properly calibrated) still abound.

So, there is still plenty of room to improve build quality – even though in some cases the cars are improving with each shipment. Better safety and refinement are even loftier targets.

How long will it take for Chinese-made and Chinese-branded cars to meet contemporary standards? That’s a question industry observers have been wrestling with for some time.

In theory it shouldn’t take long because many car parts are already made in China for foreign brands, and most major car makers already build cars in China to global standards – Volkswagen, General Motors, Toyota, to name a few. But those vehicles and parts were engineered by foreign automakers and, generally, finished to foreign standards.

What I’m talking about specifically are Chinese-designed, Chinese-engineered and Chinese-made Chinese-branded vehicles.

Some say it will take the Chinese half the time it took the Koreans to achieve their current levels of quality, reliability, safety and refinement which, incidentally, are close to matching the Japanese.

I have no doubt the Chinese rate of improvement will be quicker than the Koreans, I just can’t decide if it will be five years or 10 before we see a world-class Chinese-branded car.

We should also be cautious about which Korean brands we are comparing the Chinese with, because there is Korean quality – and then there is Korean quality.

Hyundai-Kia, Korea’s biggest automaker, is largely responsible for the shift in perception of the quality of Korean cars. But they’re not the only ones to make vehicles in Korea. There’s also the General Motors division that was once known as Daewoo (sold in Australia as Holdens) and Ssangyong, among others.

General Motors’ Korean cars have improved from the bad old Daewoo days (the Holden Cruze, Captiva and Barina Spark are recent examples), but they’re still not on a par with the best from Hyundai-Kia. Ssangyong, although improved, also has a way to go.

And this is why it’s difficult to make a blanket statement about Chinese cars, because the blanket statements about Korean cars are inaccurate. We need to look at the culture behind individual companies.

Hyundai-Kia strips down Lexus, BMW and Mercedes-Benz limousines as part of its research into making a new small sedan or hatch. General Motors, meanwhile, seems more interested in using Korea as a base to bring its costs down. To me, the fundamental difference is that Hyundai-Kia is trying to improve its cars seemingly at any cost, while GM is trying to improve its Korean cars at a minimal cost.

With that in mind I reckon many of us have been too generous with our predictions that the Chinese will match Korean levels of quality in no time.

The Chinese car-making culture seems, to me at least, about taking shortcuts and copying the work of others, instead of doing the hard yards. This will work up to a point, and make the cars acceptable to many thousands of people.

But sales figures are only one measure of success. To design, engineer and build a car with five-star safety and leading levels of quality, refinement and driveability will take much longer.

Having predicted, after my third trip to China and having driven numerous Chinese-made cars, that the Chinese would match the Koreans in five years not 10, I’m reversing my initial forecast, and pushing it back to 10.

That’s because I under-estimated – and I suspect other industry observers have under-estimated – just how hard Korean automaker Hyundai-Kia has worked to achieve its current quality levels.

There’s one more factor to consider: It will cost the Chinese much more than they invest currently to build better cars, because research, development and engineering are the biggest costs of the car-making process. And thus as Chinese cars get better, much of their cost advantage will evaporate.

What will happen then is anyone’s guess.

Footnote: It's the policy of Ateco Automotive, the distributor of Great Wall in Australia, to withhold vehicles for evaluation by the press.

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