Roland Berger: China’s “speed advantage” not just about labour costs

Chinese industrial companies are significantly outperforming Western competitors in product development speed and cost efficiency, according to a new analysis by consulting firm Roland Berger.

In the automotive sector, Chinese manufacturers now develop new vehicles around 25–30% faster than European competitors while maintaining a cost advantage of roughly 20–30%. In some other industrial sectors, the performance gap is even larger, the consultancy said in its report titled China Speed.

The analysis highlights that China’s competitive advantage is not primarily driven by lower labour costs. Instead, about 60% of the cost gap stems from design and system decisions, including standardized product architectures, reduced product complexity and “fit-for-purpose” engineering focused on market-relevant performance.

Additional factors include highly competitive supplier ecosystems and operational efficiency.

“China Speed is not a cultural phenomenon, but the result of clear decisions regarding product design, portfolio complexity and supplier structures,” said Oliver Knapp, Senior Partner at Roland Berger. “This is precisely why parts of this approach can also be implemented in Europe.”

According to the study, Chinese companies achieve shorter development cycles through a tightly integrated development model. Key elements include shorter strategy and decision-making phases, extensive use of virtual testing, parallel development of software and hardware, and early involvement of suppliers in the development process.

In one automotive case study cited by Roland Berger, a Chinese passenger vehicle manufacturer reduced development time by around 14 months compared with global benchmarks, mainly through organizational and process improvements without compromising product readiness.

The report also notes that a large share of China’s efficiency advantage would remain even if parts of the value chain — including research and development — were relocated to Europe. In some cases, more than 50% of the efficiency gains could still be maintained.

Roland Berger argues that European companies could replicate parts of this model in a “China Speed Light” approach. European manufacturers still benefit from strong customer knowledge, regulatory expertise and established brands, but these advantages risk losing relevance if development times and cost gaps are not significantly reduced.

The study is based on cost and development-time comparisons between Chinese, European and international manufacturers, combined with benchmarking projects in the automotive and industrial sectors.

Source: Roland Berger, Photo: Fotolia