I’m afraid that both Zerohedge and Mish misunderstand what’s behind Chinese automaker Great Wall’s opening an assembly plant in Bulgaria:
Great Wall this week became the first Chinese automobile manufacturer to open an automobile assembly plant inside the European Union in the latest move suggesting the country’s carmakers are seeking to establish a beachhead into the European market.
Bulgarian Prime Minister Boyko Borisov on Tuesday attended the opening of Great Wall’s new factory in the northern Bulgarian village of Bahovitsa. The plant is to be operated jointly by Great Wall and the Bulgarian firm Litex Motors.
Let me try to explain. I predict that Great Wall’s Bulgarian plant will import all of its parts from Chinese factories. Bulgarian workers will assemble finished automobiles from probably quite large subassemblies and the finished cars will be sold as “Made in the European Union” and can be sold throughout the EU without facing duties.
This is about market not cost of production. The Chinese have limited their costs by opening the plant in Bulgaria, the EU’s poorest country and where labor costs are the least and they’ll probably only employ a relative handful of workers. Pretty cheap way to gain entrée to the largest marketplace in the world (aggregate GDP and population of the EU is larger than that of the U. S.).
I’ve said it before and I’ll say it again: there is no future for the auto manufacturing business either in the U. S. or in Europe, particularly for low cost autos. China can cut the legs off of any competitor.
And remember that COSCO (China Overseas Shipping Co.) just took over the operations at Piraeus. It’s all coming together.
Shorter: They’re building a Bulgarian auto plant for legal (tax) reasons, and not because it makes sense on purely economic terms.
It will be interesting to see what would happen if Obama’s corporate tax “overhaul” got passed. It would be funny to watch GE sell off almost all its assets overseas to shell companies to cheat the new tax code, for example.
I’ll also note that Obama’s corporate tax overhaul, from what I’ve heard reported, would benefit Obama’s favorite billionaire (Warren Buffet) while punishing his competitors. I love the smell of rent-seeking in the morning. That smell, that putrid smell. Smells lie – victory! Some day this war’s gonna end….
The bigger question is: who names a car Great Wall?
Yes, we’ve named our car after a giant pile of bricks you wouldn’t want your car to encounter.
Possible ad lines: Handles like a brick! Fast as a wall! Totally frustrates guys riding shaggy ponies! Six trademarked Humpty Dumpty airbags standard!
Branding is over rated, Michael. The Chevy Volt is an economic monstrosity and catches on fire. Truth in advertising would have required it to be the Dolt.
If the Mustang had been called the Dust Mite would it have ever become cool?
No, branding is not overrated. Remember Marion Morrison? Of course not, you remember John Wayne. Branding.