But the real implications are far different. It gives us a glimpse at some realities that China has been unwilling to face in its own globalization (sorry – “internationalization”) effort.
First, China is going to have to reconsider its “not invented here” approach to international standards, because there are some it is going to have to be prepared to accept. Auto safety standards, food safety standards, radiation standards, and the like are not negotiable.
Second, China’s industry is going to need help understanding those standards, keeping up with them as they change, and remaining competitive while doing so. Maybe the Chinese government can help, but I doubt they can be quick or nimble enough. This is going to be a powerful, compelling opportunity for some consultants someplace, because Chinese manufacturers are going to have to get up to speed fast, or they’ll have to settle for whatever third-world markets the Koreans and Japanese can’t serve.
Third, this is also going to bring about closer collaboration with global standards-setting bodies. Apart from information sharing, done well, such collaboration can become a point of competitive advantage. Foxconn, a computer and consumer electronics ODM in the Pearl River Delta, actually has an FCC lab set up in its factory in China that is capable of certifying products BEFORE they leave the factory. Look for more of that to happen in other industries, including the auto business.
Fourth, this is going to have broader implications for safety standards in China. For many big-ticket, relatively low-volume products (like cars), it is difficult to get economies of scale when you are building products to two sets of standards. Far easier, in such cases, to produce for a single set of standards, thus adopting the international one as the one you work by.
All of these are going to be good things, and in the long run will both redound to the benefit of Chinese industry, and place a higher value on collaboration with global partners.
For those who snicker at the expense of the Landwind, though, remember that some of the most substantial advances in SUV safety standards in the U.S. and Europe have come since the disastrous Suzuki Samurai crash tests in . Improvements in rollover standards, roof safety, front-end safety, and side-safety have been continuous, and the standards have continued to rise. In essence, the Landwind may not be the total POS that the tests indicate – it may just be a car that is a decade or less out of date.
And that would be no surprise – most of Chinas businesses are still a bit behind in one way or another.
Watch this space.