What I learnt from a trip

I'm current spending a few days on vacation in Morocco. I've had some interesting experiences talking with locals. The first thing I noticed in Marrakech's medina is just how many motorcycles there are. Since I haven't spent much time looking into ICE motorcycles, I did not think much of it.

But after talking to locals, I found out that the Moroccan motorcycles market is now heavily dominated by Chinese brands (I was told it's something like 80%). As one might have guessed, the China price factor had a huge impact on the local market. Now, it costs $800-900 to buy motorcycles instead of $2000. The quality is also very good according to the locals. One would imagine it has to be quite good to withstand all the punishing tolls of operating in extreme hot environment and very bumpy roads. In fact, I heard that each family can now have 1 to 2 motorcycles due to how affordable they have become. That's quite important for a country where the per capita GDP is around $4000. The difference between $900 and $2000 is quite stark for a family that makes $5000 a year and maybe have $1000 in disposable income.

The other thing I noticed is that everyone has a mobile phone now. While I only saw people selling Oppo products, I'm sure Xiaomi and Transsion are also quite common. Mobile services provided by Orange (a French telecom company that operates in Morocco) is quite good. I could get reliable 4G service in most places. I was told that Chinese companies also lowered the price of phone chargers to $2-3. The prices on those were 2 to 3 times that before. Beyond that, vast amount of Chinese electronic goods and appliances are also popular in Morocco due to the good quality and very cheap price. Since Morocco does not have much of a local manufacturing industry (agriculture and tourism are the top 2 industries), the Chinese brands are just replacing European and Japanese brands in most cases.

All of which makes me think about the auto market. As far as I can see, most of the taxis in Marrakech were cheap Dacia Logan sedans. They seem like the type you would find in many Chinese cities in late 90s and early 2000s. It felt like a safety hazard even sitting in them. The windows are still manual and AC was non-existent. I'm sure the emissions on those are probably quite bad too. I think most automakers don't take global south markets very seriously. Back 25 years ago, foreign automakers in China would not have their latest models in China. Since domestic brands were quite low in quality, customers would buy foreign brands as long as they can afford it. Over time as domestic brands got better, foreign automakers also had to bring their latest product to China, which was also becoming the world's largest market. Today, most global south markets simply do not have access to modern cars. I would imagine a lot of used cars from Japan and Europe are sold in Africa.

It seems to me that even something like BYD Qin+ and Song+ DM-i would be considered very high end in Morocco. As we've seen in the past year, BYD has spread its wings globally. It now has a very large Latin America, Southeast Asia and Central Asia presence. It has just started to enter various African markets. At the present, the prices are still quite high in these markets. But as BYD and other Chinese automakers open up factories closer to Africa, they will theoretically be able to lower prices to these markets. The new car market in the global south is probably artificially restrained by lack of attention for these markets as well as high prices. China is already selling plenty of commercial vehicles and heavy machinery in the Global South. This can be seen in all the articles about XCMG and Sany expansion and oversea sales. It would seem to me that passenger vehicle market is next. China has already become the largest auto exporter in the past year. That has caused alarms in the US and EU. Overcapacity is the latest popular phrase out of Washington and Brussels. However, I would argue that just like motorcycles, the rest of the world is actually hungry for Chinese cars. And over the next 5 to 10 years, Chinese brands will expand across the Global South and make cheap and well made cars available. There is just no way Qin+ could lose on quality to Renault or Nissan cars.

The rise of China poses quite an unique challenge to America. While American culture remains popular all across the world, it has stopped producing things that rest of the world needs. Auto industry really is the most important manufacturing industry. Appearance of Chinese brands everywhere is a strong form of soft power. Whereas people used to see China as the land of cheap knock-offs, it could now be seen as the land of cool products and innovation in the future. Just think about it, Chinese companies have already transformed the lives of Moroccans with affordable motorcycles and smart phones. Low cost and good quality Chinese cars can significantly increase auto ownership globally.