A few weeks ago, I wrote an article about the growing influence of China on the global economy. In that article, I referenced the fact that China does export some cars, but that it is not known for production outside of the domestic market. That might be about to change; a recent report from the Wall Street Journal indicates that General Motors is planning to import the Buick Envision to the United States and that it will be produced in factories in China. This marks the first Chinese-made car to be brought into the United States by any of the big Detroit brands; the Chinese-built Volvo S60 Inscription, a long-wheelbase version that is designed to increase comfort for rear-seat occupants, was introduced to the U.S. market in the summer of 2015.
The Buick Envision is a midsize, luxury crossover that is designed to compete with cars such as the Lincoln MKX and the Acura RDX. It was unveiled to the Chinese market in July 2014, starting with the 2015 model year. In China, prices for the car start at roughly RMB269,900 (about $43,450) and can go up by roughly 30% when all the option boxes are checked. GM has reported selling 57,000 Envisions in China during the first six months of 2015, per the Motley Fool, and it estimates that it will sell half as many Envisions in the U.S., or 30,000 to 40,000 per year.
The outsourcing of production to China is not a new trend. Lower costs, specifically for labor, often result in a lower overall product price. Given that cars made in China have not enjoyed the best reputation for quality when compared to global brands in the past, it’s easy to see why GM wants to be sure that this move is made carefully. However, the midsize luxury crossover segment is responsible for 26% of all U.S. passenger car, crossover, and SUV sales, and Buick doesn’t have a model in the U.S. that competes in this segment. So it makes perfect sense to bring the Envision stateside, given the success it has enjoyed in China.
This decision has been met with some raised eyebrows. The United Automotive Workers (UAW) union has been critical of a U.S. company outsourcing production. In the midst of speculative reports about plans for the Envision being imported from China, Detroit News reported a statement from UAW’s vice president, Cindy Estrada, in August 2015:
After the sacrifices made by U.S. taxpayers and the U.S. workforce to make General Motors the profitable quality company it is today, UAW members are disappointed with the tone-deaf speculation that the Envision would be imported from China … This product discussion is especially alarming in light of the current (Trans-Pacific Partnership) trade language debate. GM should stand by its declaration that it will build where it sells … The Envision should be made in the U.S. by the workforce that saved GM in its darkest time and UAW members intend to address this issue in contract talks.
Clearly, the strong statements from the UAW did not affect GM’s plans. Furthermore, it was revealed in September that Fiat-Chrysler Automobiles (FCA) has plans to move the production of many of its compact cars to Mexico (not a surprising choice given industry trends). All of these changes are occurring in the midst of negotiations between the UAW and various automakers to establish a new four-year contract. Overall, the proposed contracts are likely to increase costs for automakers, which is part of the motivation to move production of low-margin cars to markets that have lower labor costs.
It remains to be seen whether or not U.S. consumers will accept the idea of a Chinese-built car, especially from a U.S. brand, but it is clear that continued globalization of our manufacturing will shape the face of the automotive world. When we consider the success of manufacturing in China and other parts of southeast Asia for so many products, is it that far-fetched to imagine that our cars could soon come with a “Made in China” tag too?