Today there are already about 60,000 Chinese manufactured vehicles entering the US and Canadian automobile market each year, some of which may surprise you;
- Buick Envision ($32,000)
- Cadillac CT6 Plug-In Hybrid ($75,000)
- not the standard CT6’s
- cancelled for US and Canada sales in 2018
- Volvo S60 & S90 ($36,000 and $48,000)
However, what you don’t see is a single Chinese brand like BYD (serious Telsa competitor), Chery (former Chrysler partner), or Dongfeng (sold 4.1 MILLION cars in China in 2018) selling their vehicles in the North American market.
Certainly US, Canadian and European safety standards exclude the majority of Chinese engineered and manufactured vehicles from Western markets, but that is not why they do not operate here.
Why Chinese Car Companies Don’t Sell Cars in the US or Canada?
1 – Political Risk
A few years ago, US and Canadian auto sales were soaring and Chinese manufacturers were considering there options in the West. Many of them took the conservative first step of opening parts, design and engineering centers in the US, Canada and Europe. Those investments are both relatively small and fluid, meaning that can be upsized, downsized or even closed quickly.
After the 2016 US election of Donald Trump, the Chinese became very concerned about trade. Trump has beaten a China / US trade war drum now for a solid 2 years and even after that mess is cleared up the Chinese will not soon forget how fast US political fortunes can change their fortunes.
Even when there is little economic logic, the Chinese have also seen that long standing, well constructed trade deals like NAFTA can be threatened for purely political gain.
2 – US / Canada Automobile Demand Crash is Imminent
It is widely expected that the North American new passenger vehicle market will experience a near collapse in 2022 or 2023 as there are just too many vehicles being produced today. After a good 2018 in which sales slightly increased to a near all time high, auto manufacturers like Ford, Chrysler and Mercedes are finding it harder to move their existing inventories.
While total sales have been high and increasing in recent years, consumer demand has actually dropped about 3% in each of the last two years. So where are those extra cars going?
Fleet sales have been left to soak up the balance of production. At some point in the near future Budget-Rent-a-Car, US Government and Car-To-Go’s fleet departments will have all the vehicles the want, no matter how low the price.
The decline in demand is the result of:
- high quality vehicles lasting longer, extending the typical replacement cycle
- an expected recession in the US
By the early 2020’s it is projected that US/Canada auto sales will fall from a high of near 19 million units to a shockingly low 13 million units.
3 – Africa
As China continues to slow, auto manufacturers in the region will want to put their surplus product into a different market so they can keep their factories running at near peak efficiency. So where is the next logical territory for the Chinese to conquer?
With,
- much lower safety and emissions standards
- a population set to double in size over the next 20 years
- physical proximity
Africa makes a much more logical market for Chinese automobile manufacturers to put their Yuan and Renminbi to work in.
Summary
It is clear that in this uncertain world, we can be certain the Chinese will not be making substantial investments in the North American automobile market until the late 2020’s at the earliest.
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