Xina Industry & Infrastructure (XII)

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26-4-8 Ford & Poilievre would harm auto industry - automation essential - Claus > .

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It was barely over thirty years ago when I first worked with China suppliers. Back then, the common method of scaling was to throw more people at manufacturing lines, and their technological sophistication was probably 10 years or so behind the U.S. or Europe. Infrastructure was highly variable, between awful (concrete would last perhaps 7-10 years before crumbling) and good. Airports were basic and often worn and poorly kept. Tools were poorly made and poorly maintained, and the steel alloys they were made of were trash, lasting a fraction of the time steels from Europe, Japan or the U.S. would.

However, most people I worked with were eager to learn. They actively sought out experienced toolmakers and machinists to teach and train them, often paying them several multiples what their salaries were in their original countries.

Barely a decade later, I am riding high speed rail from the airport, the airports are amongst the most architecturally interesting, modern and clean, roads, bridges, tunnels, highways, buildings are amongst the best I’ve seen, and well-maintained. I saw a lot more innovation and automation in the manufacturing facilities and lines. Manufacturing facilities were much better organized and maintained, and climate controlled to improve quality (comfort of operators was a side benefit).

There is still a lot of variability between vendors, but you can find ones that can produce goods and materials as high quality as anyone else, sometimes more, and usually for a lot less due to all the automation. And they can often execute and iterate more rapidly due to sheer numbers of design, engineering and manufacturing personnel.

As far as automobiles, China’s government realized they’d continue to lag if they stayed with ICEV, and saw potential in BEVs to leapfrog the U.S., Europe, Japan and South Korea, especially as most legacy brands seemed to ignore or discount them. So they paid royalties for the initial set of functional patents, and invested heavily in basic R&D and scaling manufacturing of batteries and motors.

They also subsidized any manufacturer for a while to speed the pace of innovation and scaling. They stopped that a few years ago as the level of capability was sufficient. That is why there has been a lot of consolidation, hundreds of smaller manufacturers have gone out of business or been acquired by the more successful companies. It is now survival of the fittest amongst the remaining players, and it is going to be difficult for legacy brands to compete.

Now it’s time for the rest of the industry to learn and adapt or die. If they don’t, they may find themselves limited to highly-protected domestic markets as their goods won’t be able to compete globally.