“China, in my view, has enough creativity and engineering power to do something on its own and not depend on copying.” Ralf Speth, CEO of Jaguar Land Rover (JLR), Tata Group’s subsidiary, made this remark at a forum held in Bombay. What triggered him to say this is a yet-to-be-launched SUV made by a Chinese automaker. On June 18, The Economic Times of India made a comparison between this SUV and an Evoque by Land Rover in exactly the same color, a big, eye-catching picture of half a page, titled “Copycat Chinese car hot in Land Rover’s pursuit”. They are very much alike, inside and out. “They copied not just the outside, also the interior”, said Speth. This new model has been shown in the trailers in China’s most popular online video series, Diors Man. This is a successful promotion, not just because the drama’s style goes quite well with this SUV, but also because tens of thousands of people are inquiring about it in auto forums. The most frequently asked question is, “When can we buy this ‘Evoque’ at the price of 150,000 yuan (US$25,000)?”.
The surface not so simple
Apparently, everything seems very clear, and the story is also very simple: a Chinese manufacturer copied an imported car and set a low price to lure customers. Thus, we have every reason to make an easy moral or emotional judgment. But if we jump to that conclusion, our judgment could be too hasty, and lack constructive insight. To take the matter on its merits, take a closer look at the two cars.
- Land Rover, America’s engine plus Germany’s gearbox
Land Rover Evoque, having no engine of its own, borrows its former owner Ford’s EcoBoost series 2.0T four-cylinder turbo engine (Land Rover, purchased by Ford, was then resold to Tata). Without a transmission of its own make, it uses German ZF company 9-speed automatic gearbox.
- The “knock-off” SUV, China’s engine plus China’s gearbox
In contrast, it uses 4G63S4T, an engine from Shenyang Aerospace Mitsubishi Engine Manufacturing Co., Ltd. Its transmission SR8AT-300 is from Shandong Shengrui Transmission Co., Ltd. China owns the intellectual property rights of this gearbox.
3. The power of price
In China, the price of the imported Land Rover Evoque is 450,000 RMB, while the local SUV, having better configurations, is priced at only one-third of the former. So the story gradually becomes interesting. The huge price difference (300,000 RMB, or US$50,000) is a fact very hard to ignore. This reminds us of Marx’s description on labor productivity: “Producers through competition, continuously improve labor productivity, so as to shorten the average working time of a unit of product”. If you think political economics is too abstract, let us look back at the Opium War period of modern history. British textile machines drastically lowered the price of cloth to a fraction of Chinese loom-woven textiles. Capitalism, with its low price of commodity, is the heavy artillery.
Eleven years ago in 2004, a Hebei automaker produced two models, highly resembling the Honda CRV and BMW X5, for very low prices. But the engine and gearbox were way backward. At that time, driving either of copycats demanded driver’s big heart for the rough work. At the same time, people in the car had to enjoy a free gift: the contempt in the eyes of passers-by.
This year, at the Shanghai International Auto Show in May, any domestic cars in the price range of 120,000-150,000 yuan (US$ 20,000-25,000), gave people a deep impression of their fine workmanship. When led into the cockpit of a Geely sedan or GAC SUV without previous knowledge of the brand names, most people will probably think themselves sitting in a German sedan. More importantly, in addition to the appearance of exquisite workmanship, Chinese manufacturers seem to have overnight mastered the technology of the turbocharged engine and gearbox. From the Great Wall Automobile GW4C20 to the Chery Automobile SQRF4J16, a series of products has been in mass-loaded. Amid the fierce domestic fuel-consumption battles, Chinese car producers with lofty aspirations are launching new-generation hybrids and all-electric vehicles to try to catch up with the world automotive giants.
The Chinese “knock-off Evoque” at the price of US$ 25,000, is not an individual case. Chinese people are exerting their infinite imagination and enthusiasm to produce cars resembling the Audi Q5, the Volkswagen Touareg, and even the Porsche Macan. These cars all carry a turbocharged engine and automatic transmission, and the prices range from USD 20,000-25,000, with apparently nice workmanship.
Incredible price, great leaps in workmanship, the core components with independent intellectual property rights: No one can deny that they have achieved success and glory to some extent. While we should start to feel proud of China’s automobile industry, we still want to reiterate the advice from Ralf Speth, “China has enough creativity and engineering power to do something on their own and not depend on copying”, an exhortation from a candid friend.