February 7, 2012

By 2020 the American Car Industry will be a shadow of its former self

CARS - China is mass producing cars and they're getting very good at copying other car manufacturers. Imagine being able to buy a Ford Mustang... it looks like a Mustang, it drives like a Mustang, heck it is a Mustang in every way that matters. But it is made in China.

And its place of manufacturing isn't the only thing that would be different. It would also cost less than a third of what a Mustang currently costs.

Now ask yourself, what car do you think average Americans would buy when given the option between the American Mustang and the Chinese Mustang which is exactly the same but only a percentage of the price?

The answer is obvious. National pride can't compete with that kind of low prices.

And this isn't just a matter of Ford's growing manufacturing operations in China. Every major manufacturer is now building in China because they've realize that their competitors are doing the same thing and they have to stay competitive.

In 2011 all of Europe's car manufacturers made 1.7 million cars. China beat that easily with 3 million cars. The silly thing is that China is just getting started, by 2020 China will be producing an estimated 10 million cars per year (that is roughly 20% of all new cars that are sold annually currently) and their build quality keeps improving because they're copying the best designs from Europe, Japan and the USA.

So what it really adds up to is by 2020 you will be able to buy a car designed by German, Italian and Japanese engineers and built in China... and it will cost a percentage of a new car currently costs.

The end result will be American car manufacturers (and European manufacturers too) won't be able to compete. Even the big name supercar manufacturers like Ferrari, Aston Martin, Lamborghini will be thinking about moving their manufacturing to China because they have to stay competitive with their prices.

It isn't going to happen all at once either. It will happen in stages. Jumps. Economic jitters. The occasional recession. Government bailouts with money borrowed ironically from China.

Eventually China will realize they don't have to bailout the USA's debts and the USA will have to finally reconsider their economic model.

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