This Is A Big Economic Change: GM To Import Buicks From China
Two decades ago this is something that no one really thought would happen. The very idea that one of Detroit’s Big Three would be importing cars from China to sell to Americans. And especially something like a crossover SUV, where the profit margins are usually thought to be large enough to cover US wage costs. But it is happening: General Motors GM -1.56% has just announced that its new Buick Envision will be sold in the US but it is manufactured in China. Not just assembled, we should note, but properly manufactured. Designed in Detroit still, yes, the plant at least partly owned there, but the actual labour of construction is all in China.
There are, of course, car industry specifics as to why this is happening but that’s not what we’re about here. Rather, it’s just fascinating how the economics of trade have changed in such a short time. I’m old enough to recall when Japanese and European imports were decried: tariff barriers were erected certainly against the Japanese and to some extent against the European manufactures. At which point all went off and built plants outside the traditional and union dominated Rust Belt and carried on making cars that people wanted to buy. While there’s a bit of whining from the UAW about this more recent idea of importing from China no one is actually suggesting either than GM cannot do this, should not do this or should be taxed out of doing this.
The basic news:
When the Buick Envision hits the streets late this spring, it will carry a unique distinction: it will be the first Chinese-built model line to be sold in the United States.
That is something of a distinction. And we can regard it greatly to China’s credit that it has been able to do this. Back in 1978 China’s GDP per capita was $1,000 a year in modern money. That’s the same level as England in 1600. America has never actually, well, not since the European arrival, been that poor. And yet less than 40 years later it is capable of producing something to compete directly with locally made products? Do note that this isn’t, as those early Japanese cars were, being marketed as something seriously cheap and not of good quality. This is carrying a mainstream brand and they’re just not going to do that if the product itself is not up to scratch.
As to why there isn’t that old outcry, it’s simply because while this may be the first from China, people are just more relaxed about imports in general these days:
Buick wants to capture a piece of the rapidly growing midsize crossover segment by shipping from a joint venture plant in Yantai, China, a vehicle launched in that market more than a year ago. Last year, Buick sold more than 140,000 Envisions in China.
So, they’re already making the car in bulk over there. They’re tooled up, the workforce is trained, they’ve got their supply chain working: why not make them there then ship them?
Stephanie Brinley, an industry analyst with IHS Automotive, doesn’t expect that most American consumers will care where the Envision or any other vehicle is built.
“Buick is already importing from South Korea, Europe and Poland,” Brinley said. “Vehicles are coming from all over the world for all manufacturers.”
And that, of course, is how it should be. The point and purpose of trade is so that we get to enjoy those lovely imports: exports are just the work we do to get them. And as both Adam Smith and Frederic Bastiat pointed out, the whole point of the economy is consumption. We don’t in fact care who makes something, nor where: we care only that we get to enjoy the use of it.
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