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Coming soon, the $5000 car
Sunday Mail - Adelaide Now, 5 August '06
Segment Y in the press
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» Coming soon, the $5000 car
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Cheap Chinese cars, some costing just $5000, are hitting international markets and causing concern in South Australia's vehicle industry.

Described by experts as "crude and simple", the cars are merely seen as the first generation from an awakening economic giant eager to flex its manufacturing muscle around the world.
"If these cars aren't reliable - the quality is not there - then they'll be seen as lemons and people won't buy them," Australian Manufacturing Workers Union state secretary John Camillo said. "But if they've got the high quality and low cost, and if it's very, very good then we've got major problems."

Apart from labour, the vehicles are cheap because there are no research and development costs. China copies cars as it doesn't recognise intellectual property rights. As well, the vehicles fail to meet Western standards for safety and emission norms.

While China is producing bigger and more expensive cars, especially in partnership with some of the world's largest car manufacturers, a home-grown example of cheaper vehicles includes the Chery QQ, which is based on the Daewoo Matiz. The car is selling in countries such as Egypt, Iran, Syria and Algeria for about $5400.

Another manufacturer, Geely, sells its entry level Haoqing, which is based on the Daihatsu Charade, for about $4900. "It's not a matter of if, it's when they will bring these vehicles into Australia, even though it's probably another five to 10 years away," Mr Camillo said. "They are always looking at getting bigger and bigger, that's why Ford and Holdens have established the joint partnership with China because they can see the writing on the wall."

However, Australia's car makers and some experts are playing down the expected Chinese invasion. Paul Blokland, director of Segment Y Automotive Intelligence, an automotive consultancy, says the current cheap models would need substantial improvements to meet Australian legal standards, substantially increasing their cost. The Chinese would also have to provide service and parts back-up, something they failed to do in the Indonesian motorcycle market. "I think in about five years the first generation of these cars will be more marketable to Western markets, including Australia," Mr Blokland said. "I think they'll be quite common at the very low end of the market in the way that a Hyundai or a Kia is."

While GM is the largest car maker in China, Holden spokesman Jason Laird said the Chinese-owned companies would have to work hard to please fussy Australian buyers and gain market share. "Everybody is aware of what's happening in the Chinese car market and their potential growth and their long-term aspirations for export," he said. "Rather than us preparing for them coming, they have to have reasonable strategies in place to try and come after our cars, just like the Japanese and the Korean manufacturers have done."

But with tariffs dropping from the current 10 per cent to 5 per cent in 2010 and possibly lower further down the track, the unions are worried. "If we don't do anything and we just sit back then these (Chinese) cars will have a major impact on the local auto industry," Mr Camillo said. "There won't be any car industry and we'll just import the vehicles - we'll end up being just a mining country."