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Auto industry feels the pain of inflation [Copy link] 中文

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Post time 2008-4-25 14:58:17 |Display all floors
Cost leadership was once the "competitive advantage" of Chinese car manufacturers,largely a bonus from the cheap labor cost. However, the price index has been rising since 2007, everything is getting more expensive, which lead to the price rise of auto veihcles. Many domestic car companies have plans to increase car prices, including Chang'an ,Chery.Other car companies are still on the watch, ready to adjust prices when it can not sustain on the current price. I don't know how long can Chinese car companies keep the current low prices. Taking measure to control expenses will not work in the long run since the manufacturing cost is destined to increase. But Where is the way for them?
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Post time 2008-4-25 17:00:03 |Display all floors
Originally posted by wanzheli at 2008-4-25 14:58
Cost leadership was once the "competitive advantage" of Chinese car manufacturers,largely a bonus from the cheap labor cost. However, the price index has been rising since 2007, everythin ...



Basically prices for iron ores, steel,oil, etc have INCREASED tremendously over the PAST years.............
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Post time 2008-4-25 20:24:18 |Display all floors
They have to increase productivity per person. The problem China faces is that costs are rising very rapidly and increasing productivity per person requires a lot of time once you get beyond the "move them into factories and off of farms" stage.
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Post time 2008-4-26 19:33:29 |Display all floors
Originally posted by caringhk at 2008-4-25 17:00



Basically prices for iron ores, steel,oil, etc have INCREASED tremendously over the PAST years.............

True, these are still part of whole problem package. One another important factor is labor expenses, as the CPI rising for a long time, the auto industry employee's salaries also have to adjust . So i am not sure how the Chinese auto makers can maintain cost leadership. I have already heard that some companies lick GM are considering moving to countries with lower labor cost such as Indonesia and Viet Nam.
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Post time 2008-4-26 19:44:05 |Display all floors
Originally posted by interesting at 2008-4-25 20:24
They have to increase productivity per person. The problem China faces is that costs are rising very rapidly and increasing productivity per person requires a lot of time once you get beyond the &q ...

This is a good advice, the focus of the Chinese auto industry seems to be reducing costs and controling expenses. But this tactic can not assure you win, it can only help you get a upper hand in competition. Increasing productivity is another way to handle the rising costs. But how to make it ?Invest more in R&D? in advanced equipments?
A lot of auto workers do not have enough education. This is a very complicated issue. I am sure i need a book to explain if i can:)
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Post time 2008-4-26 20:19:08 |Display all floors

To interesting

I assume that you have quite knowledge of Chinese educational system.
China adopts a nine-year compulsory education policy and it's well executed in the eastern coastal area. But this is not the case in the middle and western provinces which are the largest soure of China's migrant workers. They have double identity: worker in town and farmer in the country of which the last one is the most important and determines their destiny. These workers often only have 6 or seven years' eductaion.I know plenty of them. So it will take too much money to let these workers increase productivity.
As to higher education, it focuses too much on universal education and ignore the polytechnic part. Students are eager to get a diploma and pass exams ,they do not take much time to take interns and practice. Actually, in China, it's not an honor to get into a polytechnic school, it is considered to be too low a level . The government approriates a huge number of money into universal education ,but only a little to those professional school. This is why in Chian you can easily find employees with university degrees,but hard to recruit a worker with professional certificate.
These are all hurdles that must be transcended if the auto industry wants to improve productivity.
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Post time 2008-4-27 00:14:26 |Display all floors
Wan,

You're right, it's really complicated and the problems could be sourced in a variety of areas. One thing is that China needs to improve infrastructure to the interior so that operations that do not need the labor resources particular to coastal cities or large internal cities with, as you point out, higher levels of education can be effectively outsourced to the less developed interior.

Another is that it's not clear that Chinese car companies are good at designing around their production capabilities. For example, when Chery produced the QQ, it was a part for part copy of the Spark/Matiz. I don't want to get into a copy debate right now, but from a productivity standpoint, the problem with doing this is that the car was designed around GM/Daewoo manufacturing systems, not Chery's. GM/Daewoo can produce these, ex labor costs, more efficiently than Chery can because the design of the car matches up with the existing capacities of their plants and workforce. I don't think this point is as well-followed in Chinese engineering management, primarily because of examples like the QQ.

I'm not sure how much technical education adds to labor force capacity because much of it can be achieved, when the labor force doesn't require too much flexibility, by on-the-job training programs. It would be worthwhile for the major heavy industry manufacturers to explore a joint venture in worker education--this is often handled by unions or industry groups--which would provide enhanced training. This might mean taking a big risk up fron--paying people a relatively low wage for a few to several months while they gain technical skills--but it does pay off when you have good enforcement for employment contracts.

On technical training, though, I totally agree that there is an underemphasis in China. Everything I read is geared towards people going to college and getting a university degree and this does hurt skilled trades. This happens in the US as well, with predictable results: manufacturing is not up to the levels seen in Europe or Japan. However, the US cannot take the steps necessary to correct this because they are cultural anathema: Europe and Japan both rely on rigid educational hierarchies which create a literal work-based class system divided between an intellectual elite and pro.letarian working class. Though these lines blend in a complex economy, the dynamic is the same and it is simply not acceptable to Americans and, I suspect, it would not be acceptable to the Chinese as it implies a return to the bad old days of Imperial governance.

[ Last edited by interesting at 2008-4-26 10:07 PM ]
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