Interesting insight on international auto manufacturing from R&D engineer

[12,000 RPM]

http://jalopnik.com/certification-isnt-the-only-cost-hurdle-for-internatio-1494180035/@orlove

As an automotive R&D engineer I don't think that the reasoning behind the certification is significant in the whole reason why we don't get certain cars in Europe, why you don't get certain in US and so on. It is far from the wonderland that one car can be sold all over the world except North America if there is a version with the steering wheel on both sides. The most popular car in the world - VW Golf is sold in dozens of versions that seem to be the same on the outside, or even in the catalog. Oil tank for cars with the same engine in Switzerland and Germany is 0,7 litre bigger than for cars exported to UK, or Hungary for example. France has it's own regulations for the windshield washfluid tank (It's early morning and I have to come up with my own translations, sorry), due to insurance costs the same engine has to be set to different power and torque numbers (many countries are setting insurance on cars according to number of ponies, so 140 in VW's 2.0tdi can be ok in one country, but other will get 138, because at 139 a higher insurance class is starting). Just adapting the engine to the fuels used in US and Canada is more expensive than getting certification.

The real reason is price. Take for example Fiat 500, but even better - Fiat 500L. You can get Jeep Grand Cherokee for the price of the top trim 500L. You are not realizing it in US, but you have to privilege to buy your cars very, very cheap. Even if EUR to USD conversion was 1:1 exporting cheap cars from Europe to US would be very expensive and would bring very little revenue. BMW, Mercedes and Audi US are making very little money on cars they sell in US if they have to build the cars in Europe and ship it. This is why Mexico is the future of cars for US. Heck even for EU. Half of Skoda Octavia sold on B markets (countries between Austria and Romania, from Austria to the west it's A, from Romania to the east it is C) are shipped from Mexico because the Czech factories are busy producing A quality.

And premium brands can afford it to sell cars with lower margins, far worse troubles for them is to sell cars in Asia. One of the reason China is growing so freakin fast is that it is now basically a vicious circle. You want to produce something cheap, you need to go to China, but if you want to sell something in China...you need to go China and make it there as well. It is almost impossible to sell a tire in China if it did not come from tire factory located in China. That is why Conti, Michelin and all the others had to build or buy rubber companies there. You think VW is happy to have a joint venture with the Chinese government and the CEO of VW is really smiling at the chinese managers in the PR events? They got their hands on every screw in the engines, in the whole cars, half of the Cherry and other chinese car brands models are cars from GM and VW, they tried to sue but the dimensions are changed by one millimeter here and there, no patent infringement. If you want to sell cars in China, you have to build factory there. BMW's worst nightmare. Whole automotive market is expecting that China will buy dozens of millions cars each year. And the fluctuation of workforce in China is horrible. It is actually more expensive to build a car for BMW or VW in China than it is in Europe. Yes the hourly rate is lower but...the assembly line worker usually stays within one factory less than a year. He gets the training in VW and then gets a one dollar per hour more in BMW, then Cisco builds a new factory right next door, then he can go back to VW...

I flew to Hefei, China 3 times in 2013 to train a person for the same job. It costs 15000 EUR to train a person, he gets the basics in the automotive IT systems, and in 6 months he leaves to the competitor's factory with a CV that says "senior"..they know very well he is not a senior, but they don't have to spend 15000 on training, so they win anyway. We spent 45000 to train 3 people for one job last year, and we have dozens of such jobs just in R&D. The high fluctuation just in our 4 factories in China, Malaysia and 2 in India, is costing the company approx. 90 million each year. You would think that "just pay them more"... no. These are not Foxconn jobs for few dollars a day. Top management will leave the company for very little raise..

And last but not least - you guys pay literally half for gas than Europe does, but you are not using the advantage to get twice the mileage for the same money, you use it to buy cars with half the mileage than people in Europe. Your speed limits are worse than in most of Europe, yet you think 120bhp car is a rickshaw. The entry engine in Toyota Yaris IS is bigger than the one we are buying in Auris/Corolla. Just one of the crazy differences...

And you will never get French cars, because... France.

[93JC]

Or, in other words, why this:

Meanwhile, Mercedes Benz is urging Canada to adopt EU-style regulations.

http://www.thetruthaboutcars.com/2013/12/mercedes-benz-urges-canada-to-adopt-eu-regulations-as-part-of-free-trade-agreement/

... is absolute horseshit.

[MrH]

That was just an incoherent rant, mostly centered around his hatred of what he has to pay for a car in Europe.    I wonder why Jalopnik even posts this junk.

[MrH]

Or, in other words, why this:

... is absolute horseshit.

But that isn't horseshit.  There are different standards that are worth addressing.  There's definitely a cost associated with trying to meet the regulations.  One of the biggest discrepancies is in emissions standards.  US (and I believe Canada, correct me if I'm wrong) emissions are much more strict with particulates, Europe is much more concerned with CO2 emissions.  Not sure why you're valuing that junk article on Jalopnik more than a Mercedes official.

[93JC]

But that isn't horseshit.  There are different standards that are worth addressing.  There's definitely a cost associated with trying to meet the regulations.  One of the biggest discrepancies is in emissions standards.  US (and I believe Canada, correct me if I'm wrong) emissions are much more strict with particulates, Europe is much more concerned with CO2 emissions.  Not sure why you're valuing that junk article on Jalopnik more than a Mercedes official.

You're right that Canadian emissions standards (which are identical to US standards) are more stringent therefore some European vehicles (particularly with diesel engines) don't meet the standard and aren't for sale here. Start naming other ones that a European vehicle, any European vehicle, can't meet.


Here's where the article about the comments from the president of Mercedes-Benz Canada is horseshit:

If European tests were accepted, Mercedes-Benz would immediately bring in the subcompact A-class car and offer new technology such as brake lights that flash if they sense a following driver is about to crash into a car from behind, he said.

They already sell the B-class in Canada. They already sell the CLA in Canada. What's the barrier that's keeping the A-class out?

[MX793]

You're right that Canadian emissions standards (which are identical to US standards) are more stringent therefore some European vehicles (particularly with diesel engines) don't meet the standard and aren't for sale here. Start naming other ones that a European vehicle, any European vehicle, can't meet.

European safety standards are different than US standards.  Not sure about Canada, but the US 5 mph bumper standard is something that Europe doesn't have (and there are European cars that do not meet it).  Also, the US requires driver and passenger airbags in all roadgoing cars, whereas Europe does not.  The upcoming Alfa 4C had to have several changes made to meet US crash safety standards (including the addition of airbags).  Same with the Lotus Elise when it finally was imported to America.

[MrH]

There was a whole cost breakdown on what it was estimated it cost to make the Elise road legal.  It was a lot.  I'll see if I can find it.

A few other things that are different:  Head impact standards for interiors.  Knee impact standards.  Fragmentation requirements during air bag deployments.  There's a lot just for interiors.  Crash standards are an even bigger issue.

[12,000 RPM]

I think it's a balance between the business and the regulations. Certifications or not nobody in the US wants the Jalopnicorn (brown hi-po stickshift diesel wagon) but the idiots at Jalop can't seem to reconcile that

[93JC]

European safety standards are different than US standards.  Not sure about Canada, but the US 5 mph bumper standard is something that Europe doesn't have (and there are European cars that do not meet it).

That's complete and total bullshit! There hasn't been a 5 mph bumper standard in the US since 1983!!

(The 5 mph standard persisted in Canada until 2009.)

Also, the US requires driver and passenger airbags in all roadgoing cars, whereas Europe does not.

Canada does not require airbags at all.

[Colin]

The key here is that standards are different............ not necessarily "more stringent". From an emissions point of view, in Europe it is not just CO2, but a whole raft of things, but yes, we seem to be less worried about particulates from diesel which seem to be a Big Thing to the US regulators. Don't forget that the fuels are very different, too, thanks partly to different refining processes. Not all European spec engines would run well on the 87 octane fuel that you all use. The minimum in Europe is 95, and 99 for high performance engines. There are proposals to add up to 10% Ethanol to our fuels, which is causing some agitation and alarm.

Even trivial things are different - light units, for instance, even if the US n longer forces everyone to have big standard round light units like they used to, but it seems those side reflector units are still added to US market cars that Europe does not mandate. 

When you get through all this minefield, there is also the fact that consumer tastes do differ, as is proven so often on this forum, so then marketing forces take over as to what will actually appeal to the consumers.   

[MrH]

Of course there's a multitude of reasons why.  This guy's piece though is just butt hurt blabble.  He says it's more expensive to make a car in China than Europe?  Ummm....there's higher launch costs due to a bunch of reasons, one of which is the high turn over rate there.  But to say it has higher labor costs than Europe as a whole isn't entirely true.  Europe has a wide variety of labor rates, depending on where you are.  Germany, France, UK, all are pretty damn high.  Poland and Slovakia have really cheap labor rates.  But again, there's a lot of issues launching things in that part of the world.  It's difficult to find educated professionals in the area to support the plant.  No one really wants to move there permanently from their home country.

There's a ton of factors that go into where a plant is being placed.  To say you have to build in China because the screws are made in China too is asinine.  It's a combination of a lot factors, the vast majority of which are cost driven.

[Colin]

There's a ton of factors that go into where a plant is being placed.  To say you have to build in China because the screws are made in China too is asinine.  It's a combination of a lot factors, the vast majority of which are cost driven.

Absolutely. It was only a few years when a number of major manufacturers were holding the proverbial gun at the government's head, demanding huge subsidies, or threatening to move their production out of the country (GM were the worst culprit) - as this was in the lead up to a General Election, the govt caved in. At the time, the UK was seen as too costly as the £ was deemed too strong compared to the €. Of course, we then let the £ devalue by about 25%, which meant that the next round was mfrs threatening to pull out of France.

The reality is that there are so many factors which affect cost competitiveness, only some of which an individual company can control, that for the larger companies, they need to spread their mfr-ing effort (and risk - look at what happened to global prices of Disk storage after the floods in Thailand, as virtually all global production was wiped out overnight).     

[MrH]

The key here is that standards are different............ not necessarily "more stringent". From an emissions point of view, in Europe it is not just CO2, but a whole raft of things, but yes, we seem to be less worried about particulates from diesel which seem to be a Big Thing to the US regulators. Don't forget that the fuels are very different, too, thanks partly to different refining processes. Not all European spec engines would run well on the 87 octane fuel that you all use. The minimum in Europe is 95, and 99 for high performance engines. There are proposals to add up to 10% Ethanol to our fuels, which is causing some agitation and alarm.

Even trivial things are different - light units, for instance, even if the US n longer forces everyone to have big standard round light units like they used to, but it seems those side reflector units are still added to US market cars that Europe does not mandate. 

When you get through all this minefield, there is also the fact that consumer tastes do differ, as is proven so often on this forum, so then marketing forces take over as to what will actually appeal to the consumers.   

Our octane ratings are different though.  Your fuel isn't drastically different from ours, just the way octane is calculated is different.



There's a lot of differences between the US and Europe beyond just regulations.  I'm in the process of moving suspension production from Germany to the US for a vehicle already produced in the US.  Previously, suspension components were all being done in Germany and was shipped to the US for final vehicle assembly.  There are different specifications for materials in the US than Europe.  We can get a lot of materials that are pretty close to equivalent, but it's not exactly the same.  The slight difference in the make up of the material is enough to cause performance differences, different tolerancing, etc.  People don't even begin to consider the issues with doing "global launches" and just putting a plant anywhere.  Everything changes.

[MrH]

 

Absolutely. It was only a few years when a number of major manufacturers were holding the proverbial gun at the government's head, demanding huge subsidies, or threatening to move their production out of the country (GM were the worst culprit) - as this was in the lead up to a General Election, the govt caved in. At the time, the UK was seen as too costly as the £ was deemed too strong compared to the €. Of course, we then let the £ devalue by about 25%, which meant that the next round was mfrs threatening to pull out of France.

The reality is that there are so many factors which affect cost competitiveness, only some of which an individual company can control, that for the larger companies, they need to spread their mfr-ing effort (and risk - look at what happened to global prices of Disk storage after the floods in Thailand, as virtually all global production was wiped out overnight).     

Exactly.  That's what's driving so much of the production location variation right now.  Currency fluctuations will kill you if your production is all located in one country if you're supplying to the entire globe.  The Japanese got hit with the worst of it.  Honda was losing money on each Honda Fit they sold in the US.  It's the reason why Mazda wasn't profitable for so long too.  It had nothing to do with how competitive they were manufacturing the vehicle and everything to do with the yen to dollar exchange rate.  We're already seeing the beginning stages of it, but we'll see even more OEMs combining forces to create joint plants all over the place.  A lot of these smaller companies (Mazda, Subaru, the British, etc) just don't have the capital or the sales to be able to put up plants every where to protect themselves against currency fluctuations.

[MX793]

The key here is that standards are different............ not necessarily "more stringent". From an emissions point of view, in Europe it is not just CO2, but a whole raft of things, but yes, we seem to be less worried about particulates from diesel which seem to be a Big Thing to the US regulators. Don't forget that the fuels are very different, too, thanks partly to different refining processes. Not all European spec engines would run well on the 87 octane fuel that you all use. The minimum in Europe is 95, and 99 for high performance engines. There are proposals to add up to 10% Ethanol to our fuels, which is causing some agitation and alarm.

Octane differences have nothing to do with differences in refining process.  It's a difference in how the ratings are determined.  Europe uses only the RON value for Octane ratings while the US and Canada use AKI (which averages RON and MON values).  Our 87 Octane would be rated at ~92 using the European rating method.  Lower than Europe's minimum, but not that much lower.  Our midlevel 89 and premium would be roughly equivalent to your standard and high test, respectively.

[2o6]

As a side note


- The Yaris comes with the old ass 1.5L, and in the real world gets only a few MPG's less than a 1.0, or probably even a 1.3L. A 1.5L Yaris is better on gas than the 1.5L Auris. Matter of fact, the 1.8L is probably the most fuel efficient motor Toyota makes right now for cars of that size. Putting the more sophisticated 1.8L in my car would probably gain HP and MPG.

- He says the engines that cars come with are directly the result of tax and insurance evasion, but then says that American cars are poor MPG, when most top selling American cars (not trucks) are the same ones you guys get in Europe.....just minus the tax specials.

- Some motors (many) in European cars are the direct result of taxation and entry-level pricing. I remember seeing the Ford Focus "Studio", which is the now-old 1.6L Zetec with pretty much no options and fairly low compression. Instead of 125HP, its barely making 85HP. That is not desirable in a 1.5 ton vehicle.