Chinese are going crazy for cars. They’re buying more private vehicles, driving farther in them and shaping their lives around them as never before. Sparked by China’s entry into the World Trade Organization (WTO) last December, car prices are falling, and middle-income consumers are scrambling to snatch up the global, four-wheeled symbol of personal freedom. As recently as nine years ago, less than 10 percent of Chinese vehicle buyers were private individuals; by 2000 the figure had jumped to 50 percent (representing a total of about 7 million cars and trucks). Popular models cost less than $12,000, but even at that price, cars remain far out of economic reach for most Chinese. (Roughly one of every 100 Chinese people owns an auto, compared with one in two in the United States.) Nevertheless, the mood among a rising number of car purchasers these days is “giddy,” says Tim Stratford, vice chairman and general counsel of General Motors-China, one of China’s biggest automobile makers. Just like 1950s America, says Stratford, the debut of the private car is “influencing everything from popular culture to urban planning to commuter activity. China is truly the most interesting car country in the world.”
Dating back to Imperial times, transportation was always a measure of the Middle Kingdom’s technological (and territorial) ambitions. China’s ancient Great Wall, for example, was not solely a defensive structure; it was also a sort of elevated roadway of its time for foot soldiers, horses and carts. Chinese cities were clogged with foreign-made automobiles in the 1930s, but after the communists swept to power in 1949, they nationalized the car industry. Under Mao Zedong’s stultifying regime, the masses had little freedom or mobility; they were required to stick close to home under a stringent household registration system and were barred from owning private cars. The industry withered. While the Great Helmsman was collectivizing farms–and conducting state business in trains (box)–the West was rapidly building automobile plants and jet airplanes.
As recently as 15 years ago, the most prestigious Chinese consumer item was a color TV, and “having wheels” meant owning a bicycle. No longer. After 25 years of economic liberalization, the Chinese middle class has arrived. More and more Chinese have breached the magic income threshold at which private-vehicle ownership becomes a possibility–about $4,000 a year. Most of these strivers live along the bustling coast, where the car craze has sparked a construction boom in country homes.
Photographer and designer Gao Bo bought his first car in 1996 because he wanted to move to the countryside. “My car was a substitute for my feet,” he says. Now Gao Bo, 38, and several dozen Beijingers–most of them involved in art and culture–live in a rural village 40 kilometers north of Beijing. Their arrival in the village has helped spawn eight new stores and several taxi services–yet more wheels–run by villagers.
In the ’90s, joint ventures between Chinese automakers and foreign partners such as Volkswagen and General Motors focused on making sleek luxury cars for ministers and commissars, who were chauffered around. But now–just as in post-WWII America–family cars are the rage. “Our market surveys show that buyers want to drive to work and go for leisure outings with the family,” says Kevin Guan, 24, a senior specialist at Shanghai-General Motors. Guan himself is eager to buy a gray Buick SRV–a small recreational vehicle launched last November–so he can “go to the movies with my girlfriend.”
Because car ownership is a new phenomenon, China’s long-distance road system is a patchwork quilt. So-called national highways, or guodao, remain the most well traveled, but they can be treacherous. Some of the hazards: permafrost potholes, killer blind curves, endless stretches of Gobi Desert. Adventure drivers love the hairy Shanghai-to-Tibet Highway 318–a twisting, landslide-prone snake of a road slithering through some of the country’s loneliest and most exotic scenery. “It’s like China’s Route 66,” says a member of Beijing’s Off Roader 4WD Club, a group of Beijing four-wheel-drive enthusiasts who organize yearly trips from Beijing to the Tibetan capital of Lhasa, a grueling three-week expedition. “We all used to want to be rich and successful,” says off-roader Pan Li, who works for a venture-capital firm. “But after two journeys to Tibet, I’ve found a new lifestyle.”
Thanks to the construction of modern expressways, even comfort-loving yuppies will soon be driving to funky corners of China. Over the past six years, China’s highway network has jumped from 3,000 kilometers in total length to 20,000 kilometers. In December the country’s longest expressway–six or more lanes wide, stretching 1,262 kilometers from Beijing to Shanghai–opened for business. It’s cut the travel time between the two cities from more than 20 hours to roughly 12 (if the weather if decent). Yale Zhang of Automotive Resources Asia, a marketing and communications company, claims that “China’s expressway [network] has just surpassed Japan’s and is now the second biggest in the world, after the United States.”
China’s current car-buying frenzy is part and parcel of the country’s commitment to fair trade. China joined the WTO last December, and one of the prices of new membership is a requirement to cut its automobile-import tariffs from more than 80 percent to 25 percent or less by 2006. The first tariff reductions came into force on Jan. 1, when the cost of a top-of-the-line imported BMW dropped $13,000 to a still-hefty $127,582. In January and February, vehicle sales of all types jumped 13.5 percent.
“Sticker delight” has also helped trigger a cutthroat price war among top Chinese car-makers. In January an inexpensive mini-sedan called the Alto, made by Changan-Suzuki, dropped nearly 25 percent in price (to 30,000 RMB , or about $3,650). Its year-on-year sales in February soared 70 percent. The China First Automobile Group, one of China’s biggest carmakers, dropped the price of all four of its prestigious Hongqi (Red Flag) models by $3,600 per vehicle–a savings of between 9 percent and 14 percent. In January alone, Chinese buyers snapped up more than 4,000 discounted Shangai-GM Sails (a sedan priced at about $11,000)–one-seventh of the total number sold last year. Keve Guan of Shanghai-GM calls the sales surge “earth shattering.” Inside Shanghai-GM’s gleaming showroom, American images resonate. Shanghai GM is best known for its luxurious black Buicks. (The company’s reps are quick to remind visitors that in the 1930s, one of every six autos on Chinese roads was a Buick. There is a vintage 1913 Buick on the showroom floor.)
In Mao’s time, local governments lobbied to get car factories, and nearly all did. As a result, China today has a mind-boggling 120 auto plants nationwide, though most are losing money and only a handful produce more than 100,000 vehicles a year. Just as the crowded U.S. car industry faced consolidation in the early part of the 20th century, so will the Chinese industry undergo a Darwinian culling in the early part of the 21st. China’s already got its version of the Big Three: Shanghai Automotive Industry Corporation (SAIC) and its joint ventures with General Motors and Volkswagen control nearly half the market. The Jilin-based First Automobile Group (also partners with VW), and Dongfeng-Citroen (in Hubei province) are also strong. The Chinese depend on their foreign joint-venture partners for high technology and R&D. Foreign firms have had mixed success: the Shanghai-Volkswagen Santana is omnipresent, but Beijing Jeep, a lagging venture between American Motors Corp. and Beijing Automotive, is a symbol of how not to do business in China.
Over the next several years, most of the laggards are expected to merge, switch production to more profitable products or go out of business. Already Chinese officials are jittery about fast-rising urban unemployment and labor unrest. Last month hundreds of laid-off employees of Beijing Automobile Works, a foundering manufacturer, held a protest in front of the company. “This is some of the toughest competition in the world,” says Stratford.
For foreign automakers, the booming market offers new opportunities–but also the specter of a nationalistic backlash. Last December, in a blaze of publicity, dissatisfied Chinese consumers in Wuhan took up sledgehammers and demolished a Mercedes-Benz S-230. They claimed the car suffered from frequent oil leaks and other defects. (Mercedes-Benz believes the use of poor-quality fuel was to blame. In China substandard fuel, poor maintenance and dicey spare parts are common.)
Despite great expectations about the Chinese market, foreign carmakers have traveled a bumpy road. Peugeot sank $450 million into China, helped produce a poor-selling gas-guzzler, then pulled out. (Fuel, about 28 cents a liter, is more expensive than in the United States.) True, Chinese labor is cheap and abundant. But automobiles are a capital-intensive industry, and in China auto parts and other materials are expensive. So, surprisingly, making a car in China costs more than in the United States. While China is arguably the fastest-growing car market in the world, the country is still working off a very low consumer base. By 2010, total vehicle sales are expected to approach 5 million a year; by comparison, this year about 17 million cars will be sold in America.
Chinese leaders recognize that car sales can be a powerful economic catalyst, but they don’t welcome uncontrolled auto buying. Pollution levels (already up to 10 times the Western norm in some places) and traffic jams are a growing urban headache. That’s one reason Shanghai and other cities charge onerous auto-registration fees. When U.S. President George W. Bush visited Beijing in February, U.S. and Chinese officials trumpeted the city’s purchase of 2,000 U.S.-built bus engines that burn clean compressed natural gas. Beijing, which already owns one of the largest natural-gas bus fleets in the world, is also poised to adopt tough European standards to limit vehicle emissions.
But most new car buyers don’t think about pollution. They’re too busy reveling in the latest form of self-expression. That’s especially true in Beijing, where many cars are decked out with decals, curtains or window-hugging suction-cupped plush toys. One proud car owner wears black-and-white cowskin jumpsuits to complement her leopard-skin-print seat covers. Nightly, more than 30 vehicles pull into Wang Qishun’s drive-in theater, which shows movies until dawn on weekends. Wang says that while a third of his customers come to “court their sweethearts,” they’re much more discreet than in the United States, “where I’m told many Americans have been conceived in the back seat of a car.” Wang’s dream is to launch a nationwide drive-in-theater franchise, replete with auxiliary services such as car washes, parts and repair shops, and even fast food.
Beijing residents love the open road. The Chinese capital has no fewer than 30 automobile clubs. Feng Yan, a 28-year-old marketing manager, had to buy a new Cherokee after joining the Off Roader 4WD Club. His old one wasn’t up to the twice monthly rough rides. (Chinese buyers sometimes spend half a year doing research before purchasing their first car.) Last year he bought his own four-wheel-drive vehicle. Zheng Jianjun, a 31-year-old ad-agency employee, is leading a group of women on an off-road adventure–a 23-province, 30,000-kilometer pilgrimage around China’s far-flung borders, from the coast all the way to Central Asia. She says the trip will take six months. “My whole life changed after I got my own car,” she told NEWSWEEK at her send-off ceremony in early March, “Now if I don’t drive for a while I feel something’s missing.”
Pan Shiyi of Redstone International, one of Beijing’s top real-estate developers, believes China’s car craze will help prompt many affluent city residents to move to China’s version of the suburbs. Pan claims to dislike cities, so he and his wife built a weekend home. Around the same time, Redstone invited 11 of Asia’s hottest young architects to each build “dream homes” in the Beijing countryside, near the Great Wall. It’s the first stage of a planned 48-home rural enclave. “After 10 years as a developer,” says Pan, “I found that building in the city involves many rules and regulations. But here in the mountains, we can finally build houses we like. I’m liberated!” Pan, 38, couldn’t have done it all without his trusty Beijing-made Cherokee. It gets him out of the city and into a more harmonious frame of mind. And if his new development proves a hit, say Pan, he’s got even bigger dreams. He may splurge and buy a Jaguar.
