China to grab majority of car production

With labor costs 1/20th that of the USA and 1/30th that of Europe, China threatens to put North America and Europe completely out of the automobile industry. This Detroit Free Press article says, DaimlerChrysler AG hopes to make compact cars in China for sale in the United States, a company executive said Thursday. The company's China chief, Ruediger Grube, said the compact would be a totally new car and wouldn't affect production of current DaimlerChrysler, Jeep or Dodge vehicles in the United States. Grube said China's low labor costs figured heavily in the decision.

DaimlerChrysler, the world's fifth-largest automaker, is looking at producing the cars in southern China in a joint venture with Fujian Motor Industry Corp. Grube declined to say more about the vehicle, saying the company is working out details with its Chinese partner. "China today has a big, big, big advantage insofar as labor costs are concerned," Grube said. While German autoworkers earn an average of 38 euros an hour ($49.78) in wages and benefits, and U.S. autoworkers earn 28 euros an hour ($36.68), "the same worker in China gets 1.5 euros," or about $1.96 per hour, he said.

Global automakers are pouring tens of billions of dollars into their Chinese plants, creating a glut of manufacturing capacity in the world's fastest-growing automotive market. Auto analysts say overcapacity and low labor costs are among the reasons automakers want to build vehicles in China for export around the world. "One potential scenario has it that China will, more quickly than anyone can imagine, turn into an export base for cars globally," said Michael Dunne of Automotive Resources Asia, a consultancy with offices in Bangkok, Thailand, and Shanghai.