The heated debates within China's automotive industry raise questions about the true domestic profit generated per vehicle sold. This article delves into the complexities of calculating profit margins, differentiating between budget and premium models, and acknowledging the varying degrees of domestic sourcing. It highlights the impressive level of domestic manufacturing in some entry-level vehicles while acknowledging the reliance on international components for high-end features.
The recent flurry of criticism and accusations within China's automotive sector raises a critical question: how much of the profit from each vehicle sold by domestic brands like BYD, Geely, Xiaomi, and Great Wall actually stays within China? To answer this, we must define profit as the sum of profits generated during production, processing, and sales, excluding raw material costs. This includes worker wages, profits from upstream suppliers, and shareholder returns.
A crucial element in understanding this profit distribution is recognizing the significant variation in domestic content across different vehicle models. Entry-level vehicles often boast remarkably high domestic sourcing rates. Taking BYD's Qin Plus as an example, the impressive level of self-sufficiency is evident. A teardown analysis of the entry-level 60,000 RMB (approximately USD 8,500) Qin Plus DM-i reveals an astonishing level of domestic manufacturing. Of the vehicle's parts, only three – the condenser, tires, and windshield – are sourced from external suppliers. Everything else, from wiring harnesses and brake components to engine parts like crankshafts, cylinder blocks, and intake valves, is entirely domestically produced. This translates to a near-complete reliance on domestic supply chains for this model.
Contrastingly, the proportion of domestically sourced components decreases dramatically with higher-end models. Features like advanced driver-assistance systems (ADAS) often rely on foreign-sourced components, like chips from NVIDIA. Premium models, such as those above the Han, frequently utilize international suppliers for key components, such as seats from Faurecia or steering wheels from ZF. This reduces the domestic content percentage to around 80% or less.
The varying degrees of domestic manufacturing across different models highlight the intricate interplay of global supply chains and national ambitions. For entry-level models, the profit generated through domestic production likely remains a significantly larger portion of the final price. Conversely, with premium models, the profits generated by domestic manufacturers are likely to be proportionately smaller.
Ultimately, calculating the precise profit share for each vehicle requires detailed data on specific models and their corresponding sourcing strategies. While the trend clearly indicates a strong push towards domestic manufacturing in entry-level vehicles, the reliance on international suppliers for advanced technology remains substantial. This complex dynamic underlines the interplay of national ambitions and global economic realities within the contemporary automotive industry. The ongoing debates within the Chinese automotive sector may, therefore, be less about pure brand rivalry and more about the nuanced distribution of profits within this increasingly complex and integrated global market.
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