As related last month in my article on the Japanese collision repair industry, what I found in China, and specifically in Beijing, was a totally different scene from that in Japan.
In China, the arrangements for our visiting shops and government agencies were made by ICI and Akzo Nobel, the number one and number two in market share respectively in China.
Both companies sell through distributors, much as in the U.S. However, ICI had corporate staff on site in sales/marketing and training positions.
On the collision repair side, labor is cheap in China. Technicians make somewhere between $80 and $150 a month, and, in the case of some shops, housing needs and food, such as it was, were thrown in as a free benefit.
Because labor is cheap and legitimately imported OE parts are very expensive, based on a combination of duty, freight, and mark-ups, lots of parts get pounded out and unibodies get straightened that, in the U.S., would go straight to the metal compactor at the salvage yard.
It was amazing to see just what could be done with modest equipment and a lot of time. It truly brought new meaning to the British expression "panel beater."
Even though parts were expensive, it is almost unheard of to actually "total out" a one or two year old car.
I saw in one shop the penultimate of this. They had taken a two-foot square piece of a Toyota van floor plan along with some salvaged from the wreck mechanicals, and with $35,000+ at cost in new OE parts, literally created a new vehicle.
This made sense only because of the import duty and time required, and restrictions placed on getting a new replacement vehicle.
At the shop level, I did not see much in the way of productivity. At one location, seven techs were standing around putting plastic body filler on a hood and talking.
China is interesting to visit. The Great Wall is truly unbelievable and indescribable. It is the biggest "public works" project ever undertaken, and while it didn’t prove effective at stopping invaders, it is now the number one tourist attraction in China.
In ten years, China will become an enormous market for private automobiles, their replacement parts, and the equipment, supplies, and materials required to properly repair them. Today, U.S. OEs like Ford and GM, along with suppliers such as ICI and Akzo Nobel are making serious investments in distribution and manufacturing.
This investment is made with "partners" in China, and the partner is typically either owned directly by or controlled by the government. Business is based on "relationships," and these relationships take many forms, ranging from interlocking ownership of distributor, fleet, body shop, and insurer, to relationships based on payoffs and "connections."
While China is truly an "emerging market," only the foolhardy will attempt to penetrate it without first, careful study, and secondly, confidence that, like Diogenes, they have found an "honest" partner.
(Editor’s Note: See interior and exterior photos of Japanese and Chinese shops.)
Charlie Baker, Publisher
Reprinted from the February 1997 Issue of Collision Repair Industry INSIGHT.
© 1997 Collision Repair Industry INSIGHT. All Rights Reserved
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