China as the New Motor City

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GM’s Buick division is doing extremely well . . . in China. The Chinese own Volvo. And may soon own Jeep – one of the few still-viable pieces of what used to be Chrysler.

For now, it’s FiatChrysler.

Emphasis on for now.

Fiat invested in what was just Chrysler, hoping to use the once-Big-Three company as a kind of Mulberry Harbor – the floating piers used by the Allies during the Normandy invasion toward the end of WW II to establish a beachhead in Europe – only this time in America and cars rather than troops. But unlike the Normandy invasion, the Fiat invasion has been a flop so far.

Sales of the company’s signature car – the 500 mini-car – are down almost 50 percent to just over 1,000 cars a month from a high of about 2,500 cars a month back in 2014, two years after Fiat’s return to America.

And that’s the high water mark.   

Other Fiat models aren’t doing nearly as well.

Sales of the 500L – an upsized version of the 500 – are as lifeless as Dracula’s corpse, with the difference that Dracula rises at night. Fiat hasn’t sold more than 184 in a month so far this year. And that was a good month for the 500L. A bad month was February; 72 cars got bought and that’s it.

The only thing that seems to help boost Fiat’s stock is the rumor about Jeep. The Chinese are very interested in buying the one un-cankered portion of the FiatChrysler conglomerate – chiefly because China is a kind of Asian revivication of 1950s America and its middle class desires large, powerful vehicles – like the SUVs Jeep specializes in and because it has a rising middle class that’s able to afford them.

America’s middle class, meanwhile, continues to wane like Hugh Hefner’s bedroom prowess.

It’s not that Americans have changed their minds and no longer want large, powerful cars. The problem is their buying power has been gimped. Their incomes are lower, the cumulative bite of taxes higher and things like health care now cost the average person probably three times what they did back in 1970, leaving not much in the way of disposable income for things like cars.

And while small cars with small engines are not unreasonably priced (on an inflation-adjusted basis) big cars with big engines have grown exorbitantly expensive and thus, beyond their means.

Consider, for instance, the flat-lined Dodge/Chrysler portfolio, starting with the Dodge Charger sedan.

This car is, in terms of its general layout – rear-drive, heavy steel frame, V8 engine – very similar to the cars middle class and even working class Americans routinely drove during the heyday of America’s working and middle class, from (roughly) the mid-late 1950s through the mid-late 1970s.    

What’s not similar – and accounts for the sales plummet – is the price.

The V8 Charger stickers for $34,995 – equivalent to the buying power of $5,600 back in 1970. And back in 1970, you didn’t need $5,600 to buy a large, rear-wheel-drive sedan with a V8 engine. You could, as a for instance, have bought an Oldsmobile Delta 88 for about $3,800.

And the Olds was a near-Cadillac.

$5,600 – back in 1970 – could also have bought you a V8 Corvette, Chevy’s most expensive model – and left you a few hundred bucks for gas and tires.

In between then and now, the price of cars got higher but the means available to middle-class Americans did not rise to  keep up.

Fast forward to now and cars like the ones Dodge (and Chrysler) sell are not selling – except to the government (which has unlimited funds) which buys up fleets of Chargers for use as cop cars. But otherwise, forget it.

Meanwhile, China.

It is an unplowed field, rich and loamy. Brand-new superhighways, as opposed to our ancient and decrepit ones. A chunk of real estate roughly analogous to the continental United States but instead of a tired and worn out population hag-ridden by debt and with its back to the wall, a potential market at least three or four times as large and flush. Did you know that the Chinese car industry is the world’s largest car industry? That it produces more cars than the U.S. and European car industries combined? That it grows by double digits, annually?

There is a damned good reason why GM hasn’t killed off Buick.

The brand is an irrelevance here – because there is no longer a market here for a nicer-than-Chevy but-not-quite-a-Cadillac. The Americans who bought cars like that are either mostly dead or getting ready for death, whiling away their remaining hours watching Matlock reruns in old folks homes. The cohort immediately behind them, meanwhile, is trying to figure out how to afford the monthly payment on a Honda.

And the cohort behind them – the Millennials – have tuned off to cars generally, as a generation. They are the ride sharing generation. Because when you can’t afford to buy, you rent. Cars, to them, are a burden. And they are.

Financially, at least.

The whole ride-sharing thing is premised on the realization that there’s only so much peanut butter left in the empty jar; it is a finger desperately trying to reach the last scraps sticking to the wall.

But China?

It’s like a case of unopened jars of peanut butter. Cases. Stacked a mile high and as far as the eye can see. One-point-four billion Chinese, lopsided to the left of 50, in their prime car buying years and with the means to buy cars and the desire to buy them.

How do you say “Motor City” in Mandarin?

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35 COMMENTS

  1. all those car logos seem plagiarized, as so often the case from the East.
    Toyota, Nissan, etc did it with their Lexus, infinity, etc brands, logo and car design, nice to see the Chinese are giving them pay-back too, haha.

    is there no originality in Asia, what’s up with that?
    Or at least nothing other than the kind that gives us the Nissan Cube, or the Mazda grin-grill, or a Prius…

  2. The average American is now working 8 out of 12 months to support government,either directly or indirectly. Between Federal Income Taxes,State Income Taxes,Payroll taxes such as Social Security, Medicare and Medicaid taxes,unemployment taxes,local wage taxes,property taxes,sales taxes,value added taxes,tariffs,hidden taxes(there is over 150 taxes on a loaf of bread),passed on taxes plus the insidious tax of inflation the average productive American is a wage serf for more than half the population that produces nothing but perhaps bastard babies, or people too lazy to get up in the morning to go to a meaningful job,useless government employees who work a few years,”retire”and then get a pension and healthcare for life plus the useless wars and corrupt weapons manufacturers who are running around the world looking to slay dragons.
    After all of that plus a National Debt that eats up interest payments to bankers is it any wonder that the average two working spouses family can no longer afford to buy a new car?

    • Well-said, Jerry.

      It’s sad – more so, because so many people can’t see it. I can’t abide the 4th of July, people idiotically celebrating their “freedom.” I have visions of cattle mooing happily as they trot down the chute to the nail gun.

    • Don’t forget the indirect cost of regulation, Jerry. Up almost 40% since just 1990, and 1,800% since 1950. Someone’s gotta pay the $4 trillion. We all do, in the form of higher prices.

      http://regdata.org/what-if-the-us-regulatory-burden-were-its-own-country/

      Plus, these regulations don’t write and enforce themselves. You could also count the opportunity cost of otherwise smart (possibly) people in these regulatory bureaucracies who are not doing anything to increase the productive capacity of the society.

      So tax (at all levels) + regulations (at all levels) + opportunity costs = I’m surprised we have any money left at all!

  3. One of the reasons GM was able to get a foothold in Red China is because they were able to move their tools that produced the US outlawed engines and put them to use there. And all the other old production equipment that did things like make steering wheels that didn’t support airbags, seats that wouldn’t survive rear end crash tests, etc. Now that the market is established they are introducing these safety features, but for a while there you could get the equivalent of a 1980s era Buick.

    And the party leaders liked them:
    “While Buick has largely been a North American brand for most of its history, there was a time when it became popular with foreign dignitaries and elite – including Pu Yi, the last emperor of China. His personal Buick survived through a series of disasters, including the Japanese occupation and World War II, and ultimately fell into the hands of Chou En-lai, long the second-in-command to Mao Zedong. Despite helping lead the Communist revolution, Chou was an unabashed automotive fan and Pu Yi’s Buick became the pride of his collection.”

    http://www.thedetroitbureau.com/2014/01/credit-a-communist-chinese-leader-for-buicks-survival-and-record-sales/

  4. I know why people aren’t buying Fiat 500s (and especially the 500L) – they aren’t good cars.

    Yes, they have sharper handling than a Civic or Corolla (especially the Abarth), but the Japanese models come with a terrific history of reliability. Even if they have to pay $1500 or more (probably a *lot more*, since Fiat is discounting deeply to move cars), people would rather have something they know will run when they turn the key.

    I made this prediction several months ago (maybe last year?) – Jeep, being the only line in FCA that is making money, will be under tremendous pressure to become a full-line car company. I would be saddened, but not shocked, to see some of Chrysler’s aging models be re-badged as Jeeps and the Chrysler brand retired, as they seek a lifeboat.

    • As an owner of 2 Fiat 500’s that is very active in the aftermarket performance Mod scene I bet to differ on their reliability. Ours have been rock solid minus the usual maintenance jobs. ans in Silicon Valley they are every where!

      • My folks 2015 Fiat 500 has been ok except for a broken lock (fixed under warranty). They don’t drive lots of miles and its garage kept, so it should be good for quite a while.

  5. Fah Dong Ji
    http:// www .dicts.info/picture-dictionary.php?w=engine

    Cheng Shi
    http:// www .dicts.info/picture-dictionary.php?w=city

    The traditional “Big Four” domestic car manufacturers are SAIC Motor, Dongfeng, FAW and Chang’an.

    They live there. They eat there. Their children attend school there. But most of all, they work there. They are the 17,000 employees of EUPA, a “Factory City” in the southeast corner of China.
    EUPA’s massive workforce pumps out 15 million irons per year, millions of sandwich grills, microwaves, coffee makers and blenders.

    From the 2500 microwaves that come off the line each day to the four tons of rice served daily in the five cafeterias, imagine the process and the personalities that keep this massive machine well-oiled.

    Consider not only on how the goods are made, but how the Factory City operates.It’s a novel concept for the rest of the world. But it’s become a way of life in China, where a new industrial revolution is unfolding on a scale the world has never seen.

    Biggest Factory / Company Town in the World
    https://www.youtube.com/watch?v=lKseBx1YPgo

    • Not quite the same scale, but I grew up in a company town:
      Iron, coal, and steel quickly became central to the town of Johnstown. By 1860, the Cambria Iron Company of Johnstown was the leading steel producer in the United States, outproducing steel giants in Pittsburgh and Cleveland. Through the second half of the 19th century, Johnstown made much of the nation’s barbed wire. Johnstown prospered from skyrocketing demand in the western United States for barbed wire. Twenty years after its founding, the Cambria Works was a huge enterprise sprawling over 60 acres (240,000 m2) in Johnstown and employing 7,000. It owned 40,000 acres (160 km2) of valuable mineral lands in a region with a ready supply of iron, coal and limestone.

      Everyone’s dad worked for Bethlehem Steel, or had a relation who worked there. Sure, we didn’t live in company barracks, but the idea was pretty much the same. The nearby coal towns of Windber and communities in northern Cambria County supplied coal for the coke ovens and later for the electric generators that ran the scrap furnaces. Somerset County and Bedford Counties provided food. When the steel mills closed, the population plummeted. Today the main industry is keeping the old timers who stayed behind alive a few more years.

      • I think corporate towns are as American as you can get.

        Arguably the US began as the Virginia Corporation. The chowder eaters will claim it was Puritans and other religious pilgrims, but I disagree.

        The only issue with them I find legitimate is that they paid you in trinkets they called company scrip. Money must be fungible, non fungible compensation for labor is a form of slavery.

        Not that I would necessarily trade having Big Brother for supposedly abolishing slavery, but the deed is done and it is hard to undo.

        Though now days, I can’t see how the trinkets of the last few hundred years can be any more corrupt than the fiat greenbacks they’ve been forcing the world to use.

        America and China are the co economic superpowers of the world. Both are pulling away from everyone else. In a few years, the third place economy is going to be 1/5 the size of either of us.

        I like what the Russians have helped engineer for China and North Korea behind the scenes. And all the rest of the great powers who have had a major technological presence for centuries now.

        Let someone else write poetry and make pottery. China’s having fun making stuff and growing its middle and upper class.

        They are our scrappy little yellow cousins who know kung fu and shit. Not so easy to pick on as you might think. And really, why would you need to?

        If they keep it up, they’ll end up with the bulk of the moochers, and that will be fine with me. I have no dog in the who is the wealthiest nation fight.

        My distant neighbor’s rice fields don’t take the corn and wheat from my fields.

        Other than our existential enemies, like most Islamists, its a good thing when one’s neighbors wealth and technological prowess are increasing.

        Some say even the Muslims will mellow over time, I’d say keep them contained and relatively powerless, like the Chinese do, until they prove themselves civilized.

          • It is the ratio of peaceful majority to violent minority that matters. “Most Muslims” is statistically insignificant when it comes to threat assessment.

            • Funny isn’t it? Just because the US government overthrows their governments, kills millions of innocent men, women and children in their countries for the sake of Israel and the financial bottom line of the elites, and uses the CIA to create groups like Alqaeda and ISIS to generate more excuses for that killing, some of them actually get pissed off at the US and the West. Pretty unreasonable.

          • I diverge from this sensible libertarian position in the same way Eric does about China.

            Given there have been colonies since maritime empire days, one can’t expect a warm fuzzy regime of anarcho pacifism to magically descend.

            The smallest government imposition that can be hoped for is some kind of Fort System might be maintained around the perimeter of the lands of jihad submission.

            Failing that, Muslims will replace Christians, in the same way Christians once used Manifest Destiny to replace natives and Jews.

            Muslim authoritarianisms are a huge problem since the days of the crusades, but yes so far they control maybe 50 some countries in North Africa, East Mediterranean, and South Asia.

            It is their warrior class that must be addressed. Yes they have a vast submissive Amish like class that makes up the bulk of day to day Islamic society.

            But Islamic Amish aren’t like Gothic Amish. They pretend to assimilate until they get to 5% of a population. Then they start agitating for sharia tolerance and to be separate from their adopted nation until they get to maybe 20%.

            The 20% level is when they show their true colors. They start wars in their neighborhoods, until their environment is 100% to their liking.

            There is no freedom for the 80% in their midst should they enter the newly emerging no go zones.

            I’ve no doubt the CIA MI6 Mossad might be behind all of this. But it matters not. The reality exists, not some CATO fantasy where we are all just consumers who want to buy things. And neighbors who have their differences, yet can eventually come to coexist.

            That is not the history of the West. War and population replacement is the reality.

            Wars are an omnipresent phenomenon, like the wind and the rain. Not some rare event like a named hurricane.

            I don’t have all the answers. Maybe I don’t have any answer that anyone would want to accept.

            But I do see the problems, and would advise everyone here to see them as well.

        • Tor, “America and China are the co economic superpowers of the world.”

          Note the similarities between the two. China and the US are both corporatist nations i.e. their governments and businesses are tied together.

          Now note their differences. China’s corporatist economy is more or less directed to help the Chinese people via productivity at home. Whereas in corporatist US the economy is directed at helping the corporations’ bottom line, the people themselves be damned.

          IOW China looks after what is good for China and its people while the US looks after what is good for “American” corporations’ shareholders above all else.

          Cannot help noticing too that China is pretty homogenous while America is becoming more Balkanized by the minute.

          One country is on the path to growth while the other is on the path to suicide.

  6. Funny how the middle class in a communist state which isn’t supposed to have one, is outpacing the middle class here in the one country that should have the strongest anywhere in the world! It kinda makes ya wonder why.

    • Hi Graves,

      I suspect it’s (per usual) about the money – and the control.

      The U.S. is exhausted, tapped out. China is a just-emerging powerhouse that promises huge profits for the corporations which run the world.

      • Eric,

        “The U.S. is exhausted, tapped out”

        Not yet, but I think the road to serfdom from where you are is going to be a short jaunt to Gary, IN.

        I went through there yesterday.

        From US Steel on the lake down Broadway to US 6 – DECIMATED.

        But Broadway was being repaired. Hundreds of boarded up businesses with a few liquor stores and of course a plethora of the ever popular churches.

        I haven’t seen so many Pontiacs since I was on Jim Fresard’s lot.

        Really brought new meaning to the acronym PONTIAC.

      • Evidence that liberty is unnecessary to have prosperity, and that protectionism can work wonders for economic development while free trade stagnates.

        • Hi Ross,

          In many meaningful ways, there is more liberty in China now. Especially with regard to your personal life. I don’t think, for example, that the Chinese force people to buckle-up for “safety.” Nor are there jihads against petty personal vices, such as smoking. China has not been feminized, and that’s key.

          As far as free trade: I depart from Libertarian orthodoxy on this subject in that I endorse it in principle but until it exists in reality, advocate economic sanity with regard to trading with nations that do not practice free trade or have free societies.

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