{"id":271,"date":"2003-06-04T10:32:10","date_gmt":"2003-06-04T14:32:10","guid":{"rendered":"http:\/\/philip.greenspun.com\/blogtest\/2003\/06\/04\/the-chinese-car\/"},"modified":"2018-10-27T15:37:15","modified_gmt":"2018-10-27T19:37:15","slug":"the-chinese-car","status":"publish","type":"post","link":"https:\/\/philip.greenspun.com\/blog\/2003\/06\/04\/the-chinese-car\/","title":{"rendered":"The Chinese car"},"content":{"rendered":"

<\/a><\/p>\n

The June 14 issue of The Economist<\/em> has “Extinction of the Car Giants — Why America’s car industry is an endangered species” on its cover.\u00a0 The magazine predicts the death of GM, Ford, and Chrysler at the hands of Honda, Nissan, and Toyota.\u00a0 The Economist cites statistics such as the $1000 per car cost to GM of pension benefits.\u00a0 Perhaps if they were to look 10 years out they would see a lot more turmoil.<\/p>\n

 <\/p>\n

Home Depot sells window air conditioners for $80.\u00a0 They are made in China.\u00a0 When it breaks you throw it out.\u00a0 Twenty years ago a window air conditioner cost $1000 in today’s money.\u00a0 When it broke you called the repairman.<\/p>\n

 <\/p>\n

You can buy a 27″ TV for less than $200.\u00a0 It is made in China.\u00a0 If someone asks you what brand of TV you have, unless you’re a geek with no life, you won’t have a clue.\u00a0 You don’t see ads for Daewoo or Apex TVs.\u00a0 When it breaks you throw it out.\u00a0 Forty years ago the TV industry employed at least one million Americans.\u00a0 TVs were made here.\u00a0 They cost so much that they needed to be financed, thus creating jobs in banks.\u00a0 If they broke every neighborhood had a TV repairman to come out and service the machine.\u00a0 Some of the most expensive advertising campaigns of the day were for cars.\u00a0 Consequently, consumers were intensely brand-loyal and proud to own an RCA, a Philco or whatever.<\/p>\n

 <\/p>\n

Once something can be assembled in China out of 100% Chinese-made components<\/em> it can sell for approximately 1\/10th the previous price.<\/p>\n

 <\/p>\n

Let’s look at cars.\u00a0 According to http:\/\/www.autoalliance.org\/ecofacts.htm<\/a>\u00a0the auto industry employs at least 5 percent of Americans.\u00a0 People have jobs making cars.\u00a0 Because cars are so expensive people have jobs financing them, repairing them, and insuring them against collision and theft.\u00a0 Because cars are so expensive, people have jobs marketing and advertising them (more than $1000 of the price of a normal\u00a0car has gone into advertising, probably closer to $5000 for a Mercedes or BMW).<\/p>\n

 <\/p>\n

Within 10 to 20 years the Chinese will be able to sell a car that is very similar to today’s rental car:\u00a0\u00a04 doors, 4 seats, air conditioner, radio, new but not fancy.\u00a0 It will cost between $2000 and $3000 in today’s dollars.\u00a0 With cars that cheap it will be unthinkable to manufacture in the U.S.\u00a0 Consumers won’t bother to finance a $2000 purchase separately (maybe they’ll add it to their credit card debt).\u00a0 Drivers will still carry liability insurance but won’t bother with collision or theft coverage.\u00a0 With cars that cheap it won’t make sense to advertise.\u00a0 If Ford or Toyota tried to sell the average person a $25,000 car they would simply laugh, much as a Walmart shopper would think you’re crazy if you tried to persuade him to spend $2,000 on a TV.<\/p>\n

 <\/p>\n

People react with disbelief to this idea.\u00a0 Americans love their cars and identify with them.\u00a0 Consumers will pay for prestige and image.\u00a0 All true, of course, but think of how liberating it is to drive a rental Camry or Taurus with the Collision Damage Waiver.\u00a0 You don’t lock it.\u00a0 You don’t worry about it.\u00a0 You’re care-free.\u00a0 You don’t say “this is the greatest driving experience of my life” but the car is more than fine for sitting in traffic, which is mostly what urbanites do.\u00a0 After three years when it begins to require service you re-export it to Latin America and buy yourself a new one.<\/p>\n

 <\/p>\n

So it is true that there will probably still be a market for $50,000+ cars that say “I’m a rich bastard and can afford to squander money”, just as there are still $4000 plasma TVs in an era where most people spend $200 at Walmart.\u00a0 But the market share will be negligible.\u00a0 It is one thing to step up from a $27,000 Honda Accord to a $45,000 BMW.\u00a0 It is another to say “I think I’ll give up the vacation cottage and restaurant meals so that I can upgrade from my\u00a0Crawling Tiger car to an American or European car of roughly the same function”.<\/p>\n

 <\/p>\n

Aside from vast job losses the implications of the $2,000 car are profound for the U.S.\u00a0 Parking and traffic jams, already hellish, will get far worse.\u00a0 If the U.S. ever develops an appetite for information technology again we’ll charge people for using the roads during periods of congestion (using Fast Lane\/EZ-Pass style sensors).\u00a0 If not, the government will force people to buy a $3000 annual “right to drive” disk like they have in many European countries.\u00a0 The alternative will be most U.S. urban areas descending into a Bangkok-like snarl.<\/p>\n

 <\/p>\n

[If George W. had only declared war on urban traffic congestion instead of Iraq!\u00a0 We’d have sensors in the roads talking to navigation systems in the cars telling drivers which streets to avoid (London is doing this right now).\u00a0 We’d have computer-organized ride-sharing systems.\u00a0 Instead of handing out cash to people who hate the U.S. we’d hand it out to people like http:\/\/www.zipcar.com\/<\/a>\u00a0(I’d be a user of the service myself if not for the fact that\u00a0you’re not allowed to bring a dog).\u00a0 We might have ended up saving enough gasoline that we wouldn’t have needed to add Iraq to our collection of overseas possessions.]<\/p>\n","protected":false},"excerpt":{"rendered":"

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