I suppose that you’re assuming oil is going to be $35 a barrel ten years from now. And its obvious you assume that the Chinese don’t use raw materials to build cars. I think your argument for a $2000 car in today’s dollars 10 years from now is bogus. The only thing you can think about is cheap labor.

The only vehicles that can be produced in China cheaper than US or Europe are very unreliable and would never meet any of the US, Japanese or European regulations for safety or air quality. I work in the Chinese automotive industry and knowing the cost structure over, it will never happen. The comment that China is a “communist” country is a clueless remark. China is a socialist state that has 8 political parties, but the controlling party is the communist party. They do not control wages. Wages in the automotive industry have risen on average 8% per annum over the last 5 years. The efficiency of the chinese worker is much lower than western counterparts. Most raw materials are imported since the steel and plastics suppliers have more incentive to produce for non-automotive markets like construction. The biggest thing that is and will continue to drive the US auto industry down is the ignorance of the “Big Three” and the unions. The attitudes that they continue to embrace are what is driving them out of business, not the threat of China or Korea.

Here is another pertinent article – about the difficulties of importing “Smart Cars”. Basically importing cars to the US is like importing sugar – protectionism causes all sorts of problems. The US is too damn socialist.
http://www.autoweek.com/cat_content.mv?port_code=autoweek&cat_code=carnews&loc_code=index&content_code=04298935

Its already here – but in India not China. Quote: “industry analysts say Western consumers would never put up with such cheaply made vehicles” – I have to assume the industry analysts are in the pay of the automakers.
http://www.business2.com/b2/web/articles/print/0,17925,663955,00.html

Sorry for the late contribution – but I just came across this discussion – and couldn’t resist adding my 5 cents worth…

I think some of you are naive to dismiss the thrust of this weblog – whether we actually get a $2000 car or a $3000 car is not the issue – the trend seen in TVs is already happening in cars.

Buying an average car in the US today costs 29% LESS today than it did in 1994, after rebates and zero percent financing. Yet currently US automakers are sitting on 3.9 million unsold cars – the largest backlog in US auto history!

So the current trend is unlikely to stop… and, for those who believe that the government will block this overseas threat, ask yourself – will the US consumer be happy to pay 5 times as much for a comparable “basic” car as consumers in other countries??

Finally, TS Jones made some points on the cost of Ford funding its pension liability each year. But this only refers to a “normal’ year and assumes a starting point of a fully-funded pension fund – clearly not the current position!!

Earlier this year, General Motors suffered a downgrade in its corporate credit rating – because of its pension funding expenses. Reason: Lousy pension fund returns over the previous 36 months (combined with over-optimistic assumptions about projected earnings rates). Indeed, GM’s unfunded pension liability (based on GM’s own current earnings projections) more than doubled in one year, from $12 billion in 2001 to a staggering $28 billion last year.

Ford has the same problem. It had unfunded pension liabilities of $7.3 billion (based on their pension fund actually achieving Ford’s future projected returns) at the end of last year. Even after it contributed another $1 billion this year it is still way behind. This shortfall has to either come from surplus investment returns or further contributions…

We live in interesting times.

The $2000 is feasible (hell, even Clancy predicted it in The Bear and The Dragon) but the issue of congestion needs to be dealt with first. When I worked for my previous employer I telecommuted at least half my billed hours per week, and was on flexible scheduling. Still, I was driving 300 miles per week of hellish Washington DC beltway traffic jams. I switched jobs and lucky me, the new company is located so close to a metro station that one of the tunnels from the station ends right in front of my lobby. 12-minute train ride ($1.20 to $1.60 depending on time of day), plus a 30-minute bus ride to my doorstep for 25 cents (with transfer, in the morning it is 75 cents). After a month I decided to donate my commuting car to a charity and got a nice tax credit. We still keep one car but I never use it to work, I would rather spend the 84 minutes reading and listening to music (or napping) than sitting in traffic. Plus my transportations costs for work come nowhere close to what I was spending on gas, garage and insurance.

The saddest thing is I am a total car nut, but this town just sucks for recreational driving. You could be driving a $100K+ sports car and your commute will still suck.

The $2000 car will never happen. The liability for safety related issues alone costs more than that per car. Sounds like more left wing crap to me.

Chinese cars will invade USA. And I’m saying more: Chinese (and Indian) stuff (not only cars) will invade USA and Europe.
There are a lot of signals for this thesis.
1) Asian wages will stay low for a lot, because in those countries “standard economic theories” just doesn’t apply: China is a “communist” country, the government can keep low wages at will. In India I don’t see much a trade union for things being different.
2) They have both more than 1 billion population, so they are the world biggest future market. This means that USA and Europe will permit their goodies to be imported, for exporting ours there.

Tony Stevenson: “Sounds to me like the US Government should mandate sophistication in areas such as pollution control, navigation and traffic controls.”

Tony – Pollution controls and safety features *ARE* mandated on all new cars sold in the US, and have been for years. In fact, this is one of the primary reasons that I think the “$2000 Chinese crap car” scenario is unrealistic. These features cost money – lots of it. They can add hundreds, if not thousands, of dollars to the manufacturing cost of a vehicle. There’s also the fact that this market segment (cheap junkers) is already filled just fine by older used cars.

- Firebug

I’m not so sure about this … if price is so important, why aren’t we all driving Kia’s? It looks like $10K would get you a 4 door sedan with AC.

And will the government let these Chinese cars into the US? I’d sure like to try some of the small European cars (VW Lupo, etc), but they aren’t imported.

I’m not quite sure how the rental car with Collision Damage Waiver is so liberating? I would still lock it, to protect my personal crap, and to keep bozos out. And I drive a 2000 minivan, I don’t obsess over collision damage to it. I just hope there are no injuries, if there is an accident – and in ~30 years of driving I’ve never had much beyond a fender-bender.

And these traffic jams – I live in Michigan, away from Detroit. It just doesn’t seem like a problem to me. I’ve driven maybe 750,000 miles and can only think of one time I was stopped for more than a few minutes. (an accident on I-75; OK, there were a few slow periods going thru downtown Chicago at rush hour, but hardly ever at a standstill) And don’t like 90% of people with a drivers license already have a car available? So it doesn’t seem like cheap cars will cause worse jams for most of the country.