MISNOMER

Posted in Quick Hits on May 23rd, 2012 by Ed

A key part of the financial recovery of General Motors is attributable to the success of its various brands in China. You've been hit over the head with enough emerging-markets-new-middle-class stuff about China and India to last a lifetime, so let's skip to the good part.

While the brands – Buick, Cadillac, Chevrolet, etc. – and models are often familiar, GM cars sold in China are almost all made in China by the GM Shanghai division. In other words, the Buick Regal sold in China is made in Fushun, while the Regal sold in North America is made in Oshawa, Ontario (and the European version, rebadged as the Opel Insignia, is made in Russelsheim, Germany). The net result is that the car costs approximately the same in these different markets; the Chinese Regal goes for 150k – 250k RMB, or about $23,000 – $39,000 USD, on par with the US/Canada price.

Chinese-made vehicles are not sold in the US, as consumers are (rightly) skeptical of them. American- or European-made vehicles are not sold in China because of Chinese tariff policy (and, not insignificantly, because nonexistent Chinese safety regulations allow stripped China-only versions of the vehicles to be made at a considerable cost savings. Cue the hilarious Chinese Crash Test footage.) One exception for GM is full-sized trucks. None are made in China, but the American-made models are exported and offered to Chinese consumers. With all taxes and import duties, an American-made GMC Sierra Denali ($45-$50,000 in the US) retails in China for 850,000 RMB…or $135,000 USD.

"Free trade" really is a misleading term, as it implies that goods and services are being exchanged for other goods and services. In practice China sends us millions of shipping containers and we send them a small number of incredibly expensive luxury items. More accurately, they send us cheap shit and we send them our jobs. That doesn't seem like such a great deal.