‘We Have No Chance Against This’ Says Honda CEO After Witnessing ‘China Speed’ Firsthand

Ford created the concept of mass produced cars with the implementation of the moving assembly line. Half a century later, Toyota’s kaizen philosophy and “just in time” manufacturing further accelerated automotive production, and nearly every car plant in the world now incorporates lessons from all of the above. The next benchmark for the world? China Speed.

I’m excited we’re all here today so that we can read The Morning Dump. It felt a little more touch-and-go there than usual yesterday. I doubt Honda is letting the brief euphoria distract itself from the much larger existential threat from Chinese manufacturing, which has achieved the difficult: fast, cheap, and good.

Making cars is hard, and even the most cutting edge automakers out there are trying to get consumers to pay a monthly fee for tech you can get for free elsewhere. How long can that last? The EU and the US have a framework for a deal, but it’s not set in stone and at least one automaker thinks the EU is trying to keep out big trucks. At the same time, there’s some good news for EV charging in the US.

What Is China Speed?

People I know who do business in China and the United States often marvel at how easy and fast it is to manufacture items in the country. If you’ve got an idea, you can get a 3D mockup by lunch, a prototype by dinner, and your first crate of products ready to go to the market by the end of the week.

This is called ‘China Speed,’ and it’s what happens when a country decides it wants to be the world’s producer, and has the ability to cut a lot of the red tape that seems to slow down everyone else (granted, some of that red tape exists to protect consumers, the environment, and workers). And this isn’t just about building things. This is about everything.

Here’s a recent example from Transport Topics:

A Chinese-made Leapmotor C10 was traveling down Germany’s fast-moving Autobahn last year when the driver-assistance system braked sharply and jolted it to the side, as if boxed in by scooters in a crowded China megacity.

Leapmotor International’s Germany head, Martin Resch, was at the wheel and emailed engineers in Hangzhou to report the problem before going into a meeting. By the time he got out, a software update had been beamed to the electric vehicle, smoothing its behavior. A similar fix at a European carmaker would have taken weeks.

What is it that gives China such a huge advantage here? Sure, the country started out basically copying and reverse-engineering European and American designs, but it’s gone a lot further than that in the last few years, with Ford’s CEO suddenly not wanting to give up his Chinese car.

The Transport Topic article has the rather startling stat that China has created more than five times as many patents in “future land transportation technologies” than Germany in the last 20 or so years. That article also points to a very different environment:

While legacy automakers are trying to reduce their typical five- to seven-year product plans, their Chinese rivals can deliver a new model in under two years. Founders at Xpeng, Nio and Li Auto all had internet startups, and Lei Jun of Xiaomi has a background in software.

Workforces skew young and mobile, and pay scales are lower than at Western counterparts — with compensation often tied to financial targets, fostering an entrepreneurial culture. Ferocious domestic competition forces continual innovation and squeezes out inefficiencies.

This is the universe that Honda CEO Toshihiro Mibe stepped into when he went to China, according to an article in Nikkei Asia:

“We have no chance against this,” Mibe said during a visit to an auto supplier factory in Shanghai in late February. From parts procurement to logistics management, everything at the facility was automated, and there were no humans on the production floor.

The factory, operated by a major Chinese parts manufacturer, also supplies U.S.-based Tesla and maintains consistent quality while keeping labor costs down. Mibe witnessed firsthand the source of China’s competitive advantage: fast, cheap and good.

Obviously, Honda isn’t giving up, and it’s making a move to undo the now-questionable decision to get rid of the company’s legendary and independent R&D division. That’s probably not enough to reverse the slide, but it’s a start. Over at Nissan, even the design department is trying to learn from China Speed as 36Kr reports:

Nissan’s Global Design Director, Alfonso [Albaisa], admitted that Nissan’s design department has drawn important inspiration from the speed of its Shanghai studio in China. Compared with Nissan studios in other parts of the world, the employees at the Shanghai studio require 30% to 40% less work time to produce designs.

Now, Nissan’s global studios are gradually adopting the same efficient processes, abandoning rigid bureaucracy and cumbersome flowcharts to achieve more flexible and smooth creation. This transformation has greatly promoted close communication between engineering and design and accelerated the approval speed of senior management, making the entire product development process more efficient.

It’s not just Japanese automakers that are trying to rethink how they produce cars. When Ford announced more plans for its Universal EV Platform in Kentucky last year a lot of what CEO Jim Farley talked about was how it would be built:

We transformed the traditional assembly line into a tree with three main branches. We’ll assemble the front and rear of the vehicle on separate lines. The third branch is the vehicle’s structural battery, which we’ll pre-assemble with seats, consoles, and carpeting.

These three branches come together at the end, a process that revolutionizes the factory and simplifies work for our employees.

Can anyone catch up? It’s hard to say. The first step is recognizing the problem.

The Toyota Corolla Has More Tech Than A Tesla, Unless You Want To Pay For It

One of the big messages of the Lucid Investor Day I attended last month was that Lucid was going to make $69 a month from people who want to keep their advanced driving tech. For Tesla, that’s $99, and for Rivian it’s $49.99.

As Automotive News points out, this creates the sort of weird reality where the cheapest Toyota Corolla technically comes with more standard driver-assistance features than a Tesla (after Tesla removed lane keeping assistance from its basic cruise control package).

Consumers are particularly wary of subscriptions for features that once came with the car, said Jake Fisher, senior director of auto testing at Consumer Reports.

“It’s a little bit insidious, because what they’re doing is moving these features that used to be hardware to software,” Fisher said.

One example: Some automakers have moved the remote start button once found on a key fob to a smartphone app that requires a subscription after a free trial.

I do buy the argument that software-based items might benefit from a subscription because it’ll be technology that will continue to get upgraded over the long life of a car. I’m less inclined to think highly of an automaker that moves a physical feature to an app and then charges for it.

American Automakers Are Mad That Big Trucks Might Be Kept Out Of Europe

This is one of those stories that plays against a lot of my longstanding, internalized biases. I’m a Texan and I love giant pickup trucks. I also think people should generally be able to buy what they want. At the same time, I get why people don’t want big trucks in their narrow European villages. My general sense is that any societal cost should be balanced out with some form of levy (gas guzzler tax, congestion pricing for inner urban areas, et cetera).

As part of the tentative, not-yet-ratified trade deal between the European Union and the United States, there will be a harmonizing of standards between the two countries that should allow automakers to go beyond the current EU rule, which allows a small number of vehicles to be imported without being homologated.

As Automotive News reports, about 7,000 American pickups were brought to Europe this way in 2024. There’s a new article in the Financial Times with the feisty title: “US carmakers accuse EU of blocking supersized pick-up trucks from roads” related to some alleged behind-the-scenes moves by regulators to exclude big trucks. Here’s an interesting quote from an unnamed Detroit automaker to the FT:

“The U.S. administration is aware that not only is Europe dragging its feet on the trade agreement, but they’re also looking at restricting US products and limiting customer choice in Europe.”

Limiting choice, eh? There are a couple of reasons to believe that this executive might be from Stellantis. First, Stellantis loves using the term “freedom of choice” when it comes to cars. And, secondly, a majority of the trucks imported to the EU in 2024? Rams.

The Number Of High-Speed Chargers Rose By 34% In Q1

Charging infrastructure has been a common reason why consumers in the US have said they’re hesitant to make the jump to an electric car. To combat this, the Biden Administration put a lot of money into chargers, but the pace of rolling them out hasn’t exactly been China Speed. The good news is that faster deployment is finally happening, just as gas prices have gone up.

Per Bloomberg:

Some 605 public, high-speed EV fueling stations switched on in the first quarter, a 34% increase over the year-earlier period, according to Bloomberg News analysis of federal data. The country now has nearly 13,500 places to quickly add electrons to a car or truck, 25% more than it did a year ago.

[…]

Most of the demand is driven by the private sector. Truck stops, in particular, have been adding electron pumps in a bid to sell lucrative snacks and sodas to battery-powered road trippers. Pilot Flying J Inc., an empire of interstate rest stops, added chargers to nearly 30 of its locations in the first quarter, from Mount Airy, North Carolina, to North Platte, Nebraska. The company now has nearly 1,200 charging stalls, roughly half of what it intends to stand up.

Alright! Charge up the car and get some jerky. Everyone wins.

What I’m Listening To While Writing TMD

Man, this Major Lazer song featuring Wild Belle was everywhere ten years ago. Please enjoy “Be Together.”

The Big Question

What’s your go-to truck stop snack?

Top photo: LeapMotor/Honda/DepositPhotos.com