When Does An American Car Become A Chinese Export?

A locally made Tesla Model 3 electric car seen in a Tesla showroom in Shanghai on November 22, 2019. Photo credit: Xinhua/Ding Ting.

TRADE WARS, US President Donald Trump famously said, are easy to win. But how do you keep score? A new blueprint for China’s car manufacturing sector raises precisely that question.

Jointly produced by the Ministry of Commerce and China Automotive Technology and Research Centre, it signals a switch of policy emphasis from attracting foreign carmakers who will partner with local manufacturers selling to the domestic market to attracting foreign carmakers who will use China as the production base for their global exports (report via the South China Morning Post).

A consequence of Trump’s tariff war with China is a somewhat-accelerated opening up of many sectors of industry to full foreign ownership. The car industry is expected to be included in that. The pencilled-in 2022 target date may be advanced under the Phase One trade agreement with the Trump administration.

The timing is not all trade-deal driven by any means. Chinese vehicle makers have probably got as much technology transfer as they can from their foreign partners and the domestic market for new car sales is soft. Thus the time is ripe to rally foreign carmakers to the cause of boosting China’s exports.

These account for a small share of the cars made in China. For example, 3.2% of the 2.6 million vehicles manufactured in November were exported, according to the China Association of Automobile Manufacturers (CAMM). (The figures exclude knock-down kits assembled in third countries.) At less than $9 billion, the value of the exports was one-sixth that of those of US carmakers.

China’s largest automobile exporter, Cherry, is aiming to export 500,000 vehicles by 2025, four times as many as now, indicating the scale of exports growth for the sector that the government is anticipating. As long as the vehicles are made in China, the government will not worry too much about the nationality of the badge on the car.

Electric vehicles will be a big part of the auto industry’s export drive. China’s manufacturers are already making headway in sales of electric-powered buses and trucks. Still, passenger cars are the potential mass market, especially the emerging middle-class consumers in the rest of Asia and Africa.

Tesla, the US electric carmaker, is the latest foreign car company anticipating the change; indeed it has got a head start as authorities have already allowed it to operate as a wholly-owned enterprise with no local partner. The first of its Model 3 sedans have just rolled off the assembly line at its new $2-billion Shanghai plant, its first outside the United States. Tesla is getting more breaks than most foreign carmakers because the new energy sector is one of the ten industries tabbed for Chinese global leadership under the ‘Made in China 2025’ programme.

But the question will be, does, say, an Indonesian buying a Tesla made in Shanghai think he or she is buying a Chinese or a US car? In other words, whose export is it? And will the opening up of China’s car market and manufacturing prove to do much for carmaking jobs in North America? Perhaps by then the few remaining unionised car workers at Detroit’s ‘Big Three’ should be pushing for their contracts to provide for profit-sharing on worldwide revenue and not just that from North America to reflect the new scorecard Trump’s trade wars will create.

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Filed under China-U.S., Industry

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