Soaring U.S. Car Prices Open Door to Low-Cost Chinese Imports

[beijingwalker]

Soaring U.S. Car Prices Open Door to Low-Cost Chinese Imports​

You can buy a decent car in China for only about $14,000. That’s the retail price. So even with the U.S. 27.5% import tariff applied a Chinese car could be shipped to America and sold for less than $18,000. That’s 10 grand cheaper than the average used car.
John McElroy | Mar 02, 2022

Jolion hybrid among models produced for Great Wall Motors’ Haval brand.

We’ve never seen new-car prices jump as fast as they have in the past year. That’s leaving the door wide open for someone to swoop in and claim the bottom end of the market. And that “someone” could be the dozens and dozens of Chinese automakers looking for new markets to unload their excess manufacturing capacity.

I used to think the 27.5% U.S. import tariff on Chinese-made cars would protect the domestic market from those kinds of imports. Not anymore, I don’t. More on that in a minute.

New-car prices in the U.S. soared more than $6,000 last year to an average of $47,000, according to Kelley Blue Book. It’s the fastest increase we’ve ever seen. Tight inventory caused by a chip shortage, coupled with strong consumer demand, are what caused the price jump. But in this case, knowing the cause doesn’t fix the problem.

Historically it took about 24 weeks of income for the average American household to buy a new car. Right now, the average household income is about $67,000. So, the average household should be shopping for a $31,000 vehicle. Instead, most consumers are paying higher prices for the cars they want and are taking longer to pay off their loans. Ever wonder why 72-month or even 84-month car loans are becoming more common? Or that the average car is 12 years old? There’s your answer.

Because of rising car prices, fewer Americans can afford to buy a new car. Over the past 20 years the auto industry has pushed about 5 million households out of the new-car market and into the used-car market. And now, with extra-heavy demand for used cars, prices for them are going up just as fast as with new cars. Used-car prices last year jumped $6,000 to an average of about $28,000. And that is too much for a lot of people.

Meanwhile, the Chinese car market is saturated with too many car companies making too many cars. Some estimates put the overcapacity level in China at 20 million units. In response, China is rapidly ramping up its automotive exports to soak up that excess capacity.

Last year, China exported 2 million vehicles, double what it did in 2020. Those cars have been well received in markets such as South America, Africa and Southeast Asia. And you’ve got to believe that, at least for some of them, the U.S. market is next on their list.

You can buy a decent car in China for only about $14,000. That’s the retail price. So even with the U.S. 27.5% import tariff applied, a Chinese car could be shipped to America and sold for less than $18,000. That’s 10 grand cheaper than the average used car. They may not appeal to everybody, but inexpensive, brand-new cars are sure to find customers.

In the late 1960s and early 1970s, low-cost little Japanese cars found a foothold in the American market. Detroit ignored them because they collectively had less than 5% market share and didn’t seem to pose any threat to big, powerful American cars.

General Motors, Ford and Chrysler knew their customers didn’t want those kinds of cars, and they were right. But there were other customers who did. And as a new generation (baby boomers) came into the market, Japanese automakers rode that demographic boom for decades. In fact, they’re still riding it. Last year Toyota sold more cars in the U.S. than any other automaker.

So, could Haval, Great Wall or Chery become major players in the U.S.? I know that sounds preposterous, but if anyone had told me 40 years ago that Toyota would one day outsell GM in the American market, I would have told them they were crazy.

But happen it did, and it all began when the big automakers ignored the bottom end of the market.

Soaring U.S. Car Prices Open Door to Low-Cost Chinese Imports

A decent Chinese car could be shipped to America and sold for under $18,000. That’s ten grand less than the average used car.

www.wardsauto.com

 

[CrazyZ]

US car dealerships have lost their minds......demanding huge markups on regular cars. If China can figure a way to let USA consumers buy a new car online at affordable rates.....then it will grab a huge piece of the USA auto market.

 

[satyamev]

US car dealerships have lost their minds......demanding huge markups on regular cars. If China can figure a way to let USA consumers buy a new car online at affordable rates.....then it will grab a huge piece of the USA auto market.

A personal car is a emotional buy for most. Cost is not the only factor in western markets. Countries like India are very price sensitive but even here the tata nano failed because it was sold as the people's cheap car.
First time buyers didn't want to buy a "cheap" car.
My German employer used to always talk about giving the customer so much value in your product that they would be ready to pay more for it.

 

[beijingwalker]

This European war also hit Germany hard with soaring inflation

Over 50 Percent of Germans Say 'I Can Buy a Chinese Electric Car'​

26/02/2022 49 Germany, 86 China, ASIA, EUROPE, WORLD, GENERAL, HIGHWAYS, Automotive

Over 50 Percent of Germans Say 'I Can Buy a Chinese Electric Car'

International Simon-Kucher & Partners research and consulting firm examined the extent to which consumers are open to innovations in the automobile industry. According to those at the global level, German consumers have traditional tastes but are open to innovations and foreign products. Electric vehicles from China are met with interest in the German market.

Up to 70 percent of consumers who are keen on electro-cars surveyed know or have knowledge of Chinese vehicles. More than 50 percent of respondents are open to the idea of buying a Chinese brand electric car. The potential customer primarily looks for a favorable "price/performance" ratio and the vehicle to be equipped with modern technology.

Two-thirds of customers are ready to share their vehicle data or data about their personal use. Participants mostly prefer to share technical data such as oil temperature, brakes and vehicle handling. Shares such as photos or videos, or posts related to the location or personal route are not preferred.

In the statement made by Simon-Kucher about the research, in the short term, electro-vehicle customers want to try the vehicle first; meanwhile, he states that customers who pay in cash often refrain from monthly installments.

Over 50 Percent of Germans Say 'I Can Buy a Chinese Electric Car'

Over 50 Percent of Germans Say 'I Can Buy a Chinese Electric Car' - International Simon-Kucher & Partners research and consulting firm shows how open consumers are to innovations in the auto industry

raillynews.com

So is Australia

Last year also saw a Chinese-owned car brand make the top ten with MG taking the ninth spot with 39,025 leaving the showroom, more than double the 2020 sales tally of 15,253, Federal Chamber of Automotive Industries data showed (pictured is an MG ZS SUV)

Australians buy a record quantity of imports from China

Australia's imports from China are at record levels despite the strained diplomatic relations. China is also supplying more than 70 per cent of Australia's approved rapid antigen test kits.

www.dailymail.co.uk

 

[beijingwalker]

From non existent to global maket domination, it took the Chinese phones and computers a decade or so, can Chinese cars repeat this miracle?

 

[Communism]

If Japanese made cars cannot get any significant portion of the U.S. market, then Chinese made cars has 0% chance.

The only reason why Korean made cars have a place in the U.S. market is due to tariff exclusions.

 

[beijingwalker]

If Japanese made cars cannot get any significant portion of the U.S. market, then Chinese made cars has 0% chance.

The only reason why Korean made cars have a place in the U.S. market is due to tariff exclusions.

We'll see. and we'll see where this crazy high inflation will take US to.

 

[Communism]

We'll see. and we'll see where this crazy high inflation will take US to.

Your article somehow also missed the fact that seaborne shipping costs are astronomical right now.

It also is comparing apples to oranges, comparing the "average car price" to the price of a low cost car.

The low cost car segment is still a thing in the U.S., you can look at the websites of manufacturers easily to see them.

 

[Madni Bappa]

Absolutely but they will have to get the Americans to give up their bias against those vehicles.

Japanese vehicles at first had the reputation of "Jap junk" because people were being absolute bigots. Same thing Chinese vehicles will have to break through.

 

[SaadH]

If Japanese made cars cannot get any significant portion of the U.S. market, then Chinese made cars has 0% chance.

The only reason why Korean made cars have a place in the U.S. market is due to tariff exclusions.

Have you driven a japanese car lately? They look like shit, drive like shit and haven't updated their tech since the 90's. Lexus is still sporting the same LCD's they had in the early 2000's. I test drove the latest Lexus RX350 suv for my better half it was like driving a bathtub, under powered, unweildy, compact space inside and no tech refresh.

Japanese automakers' biggest selling point in the US was reliability which gave you 100K without any issues. Other automaker provide similar realibity now days and with much better performance.

Japanese cars are losing their market share and US market is ripe for cheap EV's from China.

 

[gambit]

Have you driven a japanese car lately? They look like shit, drive like shit and haven't updated their tech since the 90's. Lexus is still sporting the same LCD's they had in the early 2000's. I test drove the latest Lexus RX350 suv for my better half it was like driving a bathtub, under powered, unweildy, compact space inside and no tech refresh.

Japanese automakers' biggest selling point in the US was reliability which gave you 100K without any issues. Other automaker provide similar realibity now days and with much better performance.

Japanese cars are losing their market share and US market is ripe for cheap EV's from China.

Mine is a '10 FJ Cruiser with 160K miles. It took me on streets, trails, and cross CONUS several times. And when I said cross CONUS, I mean Pacific to Atlantic and vice versa. When you buy a car, no matter what brand, you are immediately out of the car market for about five yrs. Maybe you are wealthy enough to buy a second car, but most people buy one. After five or more yrs and you need a new car, if the Toyota served you well, would you risk tens of thousands of $$ on another brand? Maybe. But for most people, not likely.

Toyota loyalists are not that way because there is a mystique about Toyota that they cannot live without. Except for the Cruiser, that is different. They are Toyota loyalists because they'd rather spend their money on something else instead of repair bills. So far, I have replaced on my Cruiser the air filter, oil, and shocks. Soon, it will be plugs. Then later I will change the oil in the manual transmission and the diffs. Even if the motor blows some time down the line, I would replace the motor than buy another car. There is no mystique about Toyota. The motor and transmission are over engineered and under powered for reliability and durability, and the customers' repeat money proved it.

It will take yrs for Chinese autos to prove themselves. And remember the Yugo.

 

[Communism]

Have you driven a japanese car lately? They look like shit, drive like shit and haven't updated their tech since the 90's. Lexus is still sporting the same LCD's they had in the early 2000's. I test drove the latest Lexus RX350 suv for my better half it was like driving a bathtub, under powered, unweildy, compact space inside and no tech refresh.

Japanese automakers' biggest selling point in the US was reliability which gave you 100K without any issues. Other automaker provide similar realibity now days and with much better performance.

Japanese cars are losing their market share and US market is ripe for cheap EV's from China.

Toyota still makes the best hybrid cars, which are the most practical type of car for the U.S. market.

Despite that, Toyota barely is able to sell many Japanese made cars due to tariffs.

The Toyotas you see on the streets are mostly made in North America.

Those "cheap evs" have enormous range problems for the U.S. market, which makes them city cars, and we have already been over that the U.S. isn't really a "big city" country.

Tariffs make importing Chinese made cars essentially economically not feasible, and that will not change unless the tariffs change (they wont).

 

[Hamartia Antidote]

If China can figure a way to let USA consumers buy a new car online

You mean like Tesla?

 

[Hamartia Antidote]

Japanese vehicles at first had the reputation of "Jap junk" because people were being absolute bigots. Same thing Chinese vehicles will have to break through.

No, because they actually were junk. They were known rust buckets in the 1970's.

Literally rust would eat a hole through the floorboard under the brake and gas pedals. People would need metal plates welded on by a shop. It was ridiculous.

Skip to today and when do you ever hear about car owners needing to fix the floor on a 4 year old car due to rust eating through it. That would kill a company.

 

[gambit]

No, because they actually were junk. They were known rust buckets in the 1970's.

Literally rust would eat a hole through the floorboard under the brake and gas pedals. People would need metal plates welded on by a shop. It was ridiculous.

Skip to today and when do you ever hear about car owners needing to fix the floor on a 4 year old car due to rust eating through it. That would kill a company.

I remember the cars of the '70s. I was too young to have a license, but I did know how to drive. Back then, we owned cars because we had to, not because we wanted to, because all brands were so bad in terms of overall quality. Then it was compounded by the Saudi oil embargo which really did not affect total supply but that the oil company overreacted, so we ended up with gas lines. I can remember car ads that said 'Huge 2.2 L' engine. The American V8s were putting out barely 150 hp. It was a terrible couple decades for cars.