12:27 PM

Airliners built
in China?

With the news last week out of Shanghai, China that national leaders have approved a program to build large commercial aircraft, one has to immediately wonder what that news could mean to Boeing and Airbus:

It's being reported that China is expected to buy 2,230 new planes between now and 2025. They've apparently got a plan to start test flying large aircraft by 2020 along with producing its own aircraft engines. Estimates vary widely on how much the Chinese airliner market is worth, but generally, articles out there put the number at between $180 and $349 billion USD.
Regular readers of WoF know I am often brutal on Chinese products and hold a great deal of distain for the big box stores in the U.S. that sell their goods. So much of the Wally World stuff America is addicted to is below par in quality, meant to last just about long enough for you to swipe your card and get the box home. I'd love to say that Chinese airliners might be of the same quality as a $39.99 color television, but it is technically possible that they could build a pressurized flying tube to haul people that would not fall apart in mid-air.
Like it our don't, our world has become a true global economy. A toaster sold in Fresno is designed in Karachi using software engineered in Germany, thrown together in China using Malaysian parts, then shipped in a Liberian container ship to be sold at a chain of mondo-marts HQ'ed in Bentonville, Arkansas. And when the toast burns 'cause the piece o'crap breaks, tech support is provided by some clown in India who wants very much for you to believe he's actually “Bob” in Buffalo.
What will a Chinese airliner look like? That is a question only time will answer. But the one thing that is perfectly clear is this: If a comparable airliner made in Everett, Washington by Boeing sells worldwide for say $100 million, you can bet Wally World will be blowing out the Chinese versions in stores nationwide for $24,997.56. That's after their “price chopper” has “slashed” the price to just pennies over the actual cost of manufacturing the plane in the first place.

If I owned lots of stock in Boeing, would I be concerned about this? No. China is but one market on this planet, and I think the 787 Dreamliner will revolutionize commercial aviation in a way that the DC-3 did generations ago. I do not believe there is a chance that the Chinese will build as plane as efficient and cost-effective – or as drop-dead gorgeous – as the 787, so the market for Boeing products in Shanghai will still be there. I might be way wrong on that, but since we won't know for maybe 15 YEARS, it's a pretty safe bet that Boeing and Airbus will watch the emerging Chinese maket carefully and if they feel threatened, they'll adjust their product lines to fill any gaps left open by the Chinese makers.

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