Why Are Cars From China Cheaper Than Those From Europe?

In today’s automotive world, there is often talk of “Chinese speed,” which refers to the fact that Chinese manufacturers often have significantly more agile development processes than traditional car manufacturers here in the West.

It’s clearly paying off, as a new report from analyst firm Roland Berger cites speed as one of the most important reasons why Chinese manufacturers can produce cars 20 to 30 percent cheaper than those in the West. On average, it takes European manufacturers 49 months to develop a new model, whereas manufacturers in China can do it in 33 months. Lower labour and energy costs have long been seen as an important explanation for China’s lower car prices. Roland Berger’s report, on the other hand, states that this is not the case. Instead, speed, along with efficient and standardized manufacturing processes with a large number of components from local subcontractors, stands out as key to reducing costs. In addition, Chinese manufacturers are increasingly using digital tools to assess work progress. As much as 80 percent of all tests at Chinese manufacturers are conducted using virtual simulations.

China’s BYD will start production of electric cars in Europe this year at a factory in Hungary. Several other Chinese brands plan to start local production here, and several Chinese manufacturers have long had design or development studios in Europe, often in Germany. It remains to be seen whether the same efficient processes will be transferred to Europe.

• Also See: Geely Overtakes BYD As China’s Best Selling Brand