There's a simple but crucial secret behind how the Chinese brands have managed to develop cars so quickly at costs much lower than those faced by manufacturers in Europe, but it also runs counter to the way traditional car makers work: they share parts.

The ability to use standard parts across multiple models isn't new, and it is one the big reasons why global car giants such as the Volkswagen Group and Stellantis have grown to the size they are. The more you build (or source) of a single part, the cheaper it becomes. 

But China has gone one step further by breaking two unwritten rules: the first is that parts should be built to the car makers’ exact specifications; the second is that to stand out among competitors, parts should be differentiated. 

China has proven it’s possible to break those rules and still produce cars that appeal to customers, partly by using the costs saved to increase standard tech. Now other countries, including Japan, are looking at whether they can replicate that across competing brands as they scramble to match China on cost.  

“China has this industrial scale,” Ned Curic, head of development at Stellantis, told Autocar. “Look at door handles. In China, there are three different handles. Everybody has the same.”

New models from China look fairly similar, and while copying successful designs has been a feature in the country’s recent past, there’s a more practical reason. “Proportion wise, they're very similar, and why they're similar is because they use the same suppliers for the tooling,” Curic said.

Tooling is the industrial kit needed to make parts, including stamping dies and moulding presses. These are typically unique to each manufacturer because traditionally they want full control of all aspects of the car’s design.

This, however, is costly and takes a lot time, which in turn adds more cost. “That's a long lead for us, six months or so, because we do a lot of customisation on those,” Curic said. "In China, they do it close on four weeks because they use the same tools."

Stellantis learnt from Chinese and is now standardising a lot more inside in the company, Curic said, citing its own narrow range of three types of door handle.

Ford is another to spot the industrial scale. ”They’ve got this hyper level of commoditisation of parts that customers don't always see, touch or feel,” Jim Baumbick, head of Ford in Europe, told the Automotive News Europe Congress in June. He cited headlights as an example: “If you develop a new headlamp, completely new, it's three months longer than just taking a combination of parts that are modular, designed and ubiquitous in the industry. We need to do the same in a different way, here in Europe.”

The strategy allowed the growth of new brands. “That's what people didn't understand,” Philippe Houchois, head of automotive analysis at the bank Jefferies, told Autocar. "They thought all those small car brands that could not survive, but in fact the back office of a small car maker in China can be more scaled up than you realise. Because they used, say springs, that were standard across the industry, used by BYD, Geely as well as everybody else.”

The omnipresent 1.5-litre engine, originally licenced from Mitsubishi, is another good example.

China’s standardisation is in part state-led. Government mandated standards are nothing new and are vital to ensure everyone is working to the same safety, emissions and security legislation. Car makers often welcome them, particularly when they cross borders, because it reduces their engineering bill.

But China went one step further via industrial regulators Ministry of Industry and Information Technology (MIIT) and its research body the China Automotive Technology and Research Center (CATARC).

The MIIT’s 14th five-year plan, running to the end of 2025, was focused on setting out standards to allow ‘new energy’ car makers (ie those focusing on EVs and plug-in hybrids) to scale up.

The plan laid 647 automotive standards for the industry, of which 54 were mandatory and 335 were recommended national standards with the rest sector standards.

However the state was able to steer the industry down a particular path by tying some of the recommended ones to subsidies. 

The price of not following them was too costly. “That made them kind of mandatory,” Xuming Zhang, head of the World New Energy Vehicle Development Organisation (WNEVDO), told Autocar. WNEVDO is non-profit co-founded by the China Society of Automotive Engineers and global engineer standards promotion body Fisita, with the shared goal to increase global cooperation on automotive regulation.

China’s move was sensible, Zhang states, giving the example of charge sockets. “Suppliers don't want to have to make one for company A, another for company B,” Zhang said. "That’s not good for the product, the development or for their manufacturing. They cannot reach their scale of economy."

Battery cells is another area where recommended government standards turned defacto mandatory via the subsidies, Zhang said.

“China has a strong government, as you know,” he added. "Sometime it regulates, sometimes it support the industry. It may not benefit a single company, but it will benefit the industry."

Houchois at Jefferies believed Tesla was used to provide a role model here. “My theory is that the Chinese brought in Tesla, rolled out a red carpet so it could built a plant [in Shanghai] very, very quickly so it could be used to instil a sense of pressure on the Chinese carmakers,” he said. “Some of the standardisation came because they kind of duplicated Tesla for a while, which is why so many Chinese cars look like Teslas.”

The traditional method of car making, where parts are only shared within groups, is changing. Former Toyota boss and the new head of Japan Automobile Manufacturers Association Koji Sato has openly called for parts standardisation among Japanese car makers. He cited wire harnesses as an example that could boost productivity tenfold, he told Automotive News in an interview. Nissan CEO Ivan Espinosa has called for a similar approach.

Even premium car makers are starting to take notice, including BMW.  CEO Milan Nedeljkovic told investors late July that cost reduction will partly come from “increasing the speed of development through further standardization and commonality in engineering solutions and components.” Nedeljkovic was quick to assure that BMW would keen an iron grip on specifications, while also acknowledging suppliers could be leaned on for standard parts. “We have to realize that the supplier offer has increased over time,” he said. “There are industrial standards on the market, which are convincing, and it would be wrong not to use them.”

There are issues with this approach. It worked in China because it “turns out that the customers didn’t care much about the style”, Stellantis’ Curic said. Instead customers focused more on digital experiences, which could be differentiated.

That’s different in Europe. “In Europe and in North America, people still care a lot about style. The fit and finish, the materials, the look and feel. I think they make purchase decisions on that,” Curic said. Sharing parts tooling for visible features could be risky.

That is become more the case in China, where car makers are being forced by the pace of competition to find more differentiating features. “The next generation of cars will be less lookalike, I think,” Houchois said.

Enforced parts standardisation is not universally loved in China, WNEVDO’s Zhang said: “Suppliers want common parts because it makes their business easy. The car makers, when they think about their creation, their competency, are sometimes not so keen.”. He cited the desire for car makers to move from standard cell design to be able incorporate cells directly into the car body, rather than a separate pack.

The next MIIT five-year plan, the 15th, announced earlier this year, has gone a different route, marking a “decisive shift from scaling standards volume to targeting strategic technology gaps, tightening safety baselines, and deepening China’s international standardization role”, according to analysis from SESEC, a body that promotes European automotive standardization interests in China.

Essentially, as is often the case with Chinese five-year plans, the last one worked too well, leading to overcapacity, ferocious competition and declining car maker profits. Now MIIT is looking to regulate the digital side further as that becomes the new battleground.

It remains to be seen whether European car makers could actually bring themselves to share common parts, something that in the past was more associated with very small car brands who didn’t have the wherewithal to build its own switches, light units and the rest. Morris Marina doorhandles popping up on Lotuses, TVRs etc is probably the most famous example.

A move to widespread parts-sharing could even trigger claims of collusion in Europe, Houchois suggested.

However, in a period when Chinese car makers are gaining share all the time in Europe, rising close to 10% in the first half of the year, any means to reduce costs to their level will be on the table. 

“Massive global corporations need to evolve to sustain efficiency in a market that's shifting fast and forever,” Chris Mason, head of Fisita, told Autocar. “An efficiency in parts supply could help. Whether that's a golden bullet or not needs further consideration.”