When I was looking for car manufacturers that have opened up assembly plants in Eastern Europe, I stumbled upon some very interesting articles with information I haven’t heard about before. The article of Spiegel, which is a highly reputable German newspaper, is about the Chinese car manufacturer ‘’Great Wall Motors’’ which has opened an assembly plant in Bahovitsa, Bulgaria recently in 2012. When I read this, I immediately realized that this process normally is the other way around, European car manufacturers who move their assembly plants to China due to lower labor costs.
But in this article it depicts upon the opening of an assembly plant in Europe by a Chinese car manufacturer. As I kept reading the article I more or less understood why the Chinese manufacturer is making this move. Great Wall Motors is not the first Chinese car manufacturing company that wanted to open up assembly plants in Europe. There were several others; however they have failed to meet stringent European safety standards.
Other Chinese carmakers are also expanding into Europe, as they are buying assembly plants of European car manufacturers to improve the quality of their cars and therefore to meet the stringent European safety standards. This is a way for those Chinese car manufacturers to make progress in quality. So first of all, why in Europe? By producing in Europe, the cars that are produced no longer have to be exported from China to Europe and thus Great Wall Motors is circumventing EU import taxes and tariffs.
Therefore, the cars that are produced in Europe are meant to be sold in the European market. This saves Great Wall Motors a lot of money. But then a second question arises; where in Europe? Great Wall Motors did not choose Bulgaria as location for their assembly plants because of its geographical location, but rather for their cheap labor. Bulgaria is the poorest country in the European Union, and therefore is the most attractive location to open an assembly plant because it also has the lowest wages and taxes.
However, the labor force is considered as well educated and therefore ensures high productivity levels and operational performance. Another factor that made Great Wall Motors to relocate to Europe, is the fact that wages in China for factory workers have been rising the last few years, and that other car manufacturers have been relocating their assembly plants to countries in Eastern Europe to gain a more competitive edge in the European market. At first, they plan to sell its cars in Eastern Europe and expand later on into other EU countries.
Another factor they do not mention in the Article but in my opinion is also highly relevant for this topic is the EU economic crisis. Due to the economic crisis, many people have lost their jobs and therefore have less money to spend. This can be seen as another reason why Great Wall Motors went to Europe because this is a way they can market their cheaper cars to the European consumers who are very price sensitive due to the economic crisis. This is an opportunity for foreign car manufacturers in general.
To conclude, the tables have turned as it used to be European car manufacturers opening up assembly plants in China, and now it is the Chinese car manufacturers opening up assembly plants in Europe. This article resembles the reasons why this change has occurred and why Great Wall Motors has moved their production to the European continent. Article http://www. spiegel. de/international/business/cheap-labor-in-bulgaria-chinese-open-first-car-plant-in-europe-a-816851. html