Another Perspective

Beijing Buicks

Get out of the way, world -- China is into buying cars. Which could leave us stranded.

By 9.15.04

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WASHINGTON -- Here's an interesting -- even alarming -- stat: According to the Wall Street Journal, GM's Buick division sold 3 percent more cars in the United States during the first half of this year -- but in China, sales of new Buicks have jumped by more than 52 percent over the same period.

Or looked at another way: The total number of Buicks sold in the People's Republic of China during the first six months of 2004 -- 145,000 of them -- is just slightly less than the total number of Buicks GM sold right here in the United States. If this lopsided trend continues -- as it almost certainly will -- within just a few years, GM will be selling more Buicks (and maybe more cars, period) in China than it does in North America.

Can you hear the wake-up call?

Industry analysts believe the automobile market in North America is at or near the saturation point; that is, the kind of constant exponential growth in total sales and vehicle ownership experienced from the time of the Model T to the recent present is not going to continue -- because it can't. There are already about two cars for every person in this country -- and while our population will continue to grow, it won't come close to the 1 billion-plus Chinese looking to get that great GM feeling for probably 50 years, if ever.

Meanwhile, the average Chinese is fast becoming affluent enough to do that most American of things: sign up for a new car loan -- and a monthly payment. The prospect of potentially hundreds of millions of new customers -- the equivalent of two or three (or more) entire North American markets -- is generating rivulets of drool in the corporate headquarters of major automakers like GM, who have clearly seen the future.

And it ain't MoTown.

WHAT DOES IT portend? Well, for starters, it's reasonable to imagine that as the profit center of the automobile industry shifts from North America to Asia, the emphasis will tend to shift toward pleasing a different kind of customer; resources will be redirected, less and less attention will be given to the increasingly stagnant North American market -- where per-unit profits are low, labor costs are high, and regulatory hassles (including environmental and occupant safety standards) much more expensive to comply with.

Selling -- and building cars -- in the PRC will be like returning to the carefree world of the 1950s USA, when car builders could do pretty much whatever they liked (which was great for style; not so good for the environment) and the postwar Boomer generation was flush with cash and eager to buy the latest, hottest thing out of the Motor City.

The downside is the near-certainty that more U.S. jobs -- and working capital -- will pack up and head to greener pastures overseas. The automakers, ever watchful of the bottom line, will devote an ever-diminishing portion of their available resources to the increasingly less profitable North American market -- after all, the lemon's about wrung dry.

And while one can't deny the average Chinese his rightful turn behind the wheel, the reality is that adding another two or three North America's worth of motor vehicles over the next 20 years or so is going to cause alarming spikes in the cost of oil and therefore of gasoline -- to the extent it could put the arm on the entire world economy, them included.

There are environmental issues, too -- such as the massive increase in various automobile-generated effluvia that will accompany the mobilization of 1 billion Chinese. Even assuming catalytic converters and U.S.-levels of emissions control persnicketiness, the sheer number of vehicles means that even if each individual car or truck is relatively benign (most new cars are 97-98 percent "clean" at the tailpipe) the total volume of noxious stuff -- not to mention the byproducts from oil changes, radiator flushes, etc. -- is going to be enormous.

The long and short of it is we can expect to witness a sea change in the way the car business does business over the next few years that will be as impressive in its scope and effect as the introduction of the first affordable mass-produced car, the Model T, was here in the U.S. nearly 100 years ago.

Only this time, the changes will occur much, much faster.

Better hold on tight...

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About the Author

Eric Peters is an automotive columnist and author of Automotive Atrocities: The Cars You Love to Hate (Motor Books International) and a new book, Road Hogs.