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China angling to crash the global car club

Sep 2, 2017

Forget the notion that the Chinese are coming to the auto industry near you. They’re already here.

Geely has controlled Sweden’s Volvo for seven years now. Tencent Holdings owns a five percent stake in Elon Musk’s Tesla. Pacific Century Motors acquired Delphi’s Saginaw-based steering division to create Nexteer Automotive Corp. And Chinese companies spent $140 billion last year on mergers and acquisitions, second only to the United States.

General Motors’ Cadillac division sells more luxury cars in China than it does at home. So do most of Germany’s premium brands. For the first time, Ford Motor will build an existing model, the Focus compact, in China and ship it back to American showrooms.

Credit Daniel Howes / Detroit News

They’re just getting warmed up, Detroit. The Chinese hunger to become global players — and to do it much more quickly than the Japanese and South Koreans did — is driving interest in acquiring Fiat Chrysler, especially its Jeep brand. 

Buying is faster than building. That can take decades, and it can prove more costly and more fraught. Enter China’s powerful bureaucrats. Their green bias, their quotas for electric powertrains — both driven by China’s atrocious air quality — and their push for Chinese investment outside the country are reshaping the global auto industry’s priorities.

Why? Because they can. China is the world’s largest market, eclipsing the United States. China’s rising middle class, its business leadership, and a central government controlled by the ruling Communist Party are reordering an industry synonymous with Detroit and Stuttgart, Wolfsburg and Tokyo.

American consumers and regulators are no longer setting the automotive pace. The Chinese are. Their market demand, their tastes for foreign brands, their hunger to win global automotive credibility through acquisition are remaking the global auto business.

In some ways, they already have. The revival of GM’s storied Buick, including its staying power during the automaker’s epic bankruptcy, can be credited to Chinese consumers. They, more than anything, saved Buick from oblivion.

That’s not all. China’s largest contract manufacturer, Taiwan-based Foxconn Technology, assembles devices for Apple in China. Foxconn agreed to pump billions into a Wisconsin complex that would build liquid crystal displays. At its peak, it would employ as many as 10,000 people. And now it’s looking at Michigan — a prospect that has Governor Rick Snyder and the state’s economic development pros salivating.

Fair enough. Jobs are jobs, right?

But consider this: Apple CEO Tim Cook says artificial intelligence for self-driving cars is the “mother of all projects” and a top priority for Apple. Apple doesn’t sell its software to third parties. It develops its own products, markets them with Apple precision, and uses a contract manufacturer to assemble them. Someone like Foxconn, which already has been making investments in electric car companies.

Yes, the Chinese are here. And they understand that investment in American jobs right in middle America produces a political byproduct: a winning presidential coalition. That could come in very handy should Foxconn turn from manufacturing liquid crystal displays to assembling electric cars for sale right in Detroit’s backyard.

Daniel Howes is a columnist with The Detroit News. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, the University of Michigan.