China’s True Edge Is Smarter Engineering and Speed to Market

Circling around a decision is a recipe for slowness.

July 30, 2025

Jan Schulte

The BYD Seal EV at IAA 2023. (Sebastian Blanco)

It is commonly believed that Chinese OEMs have a distinct advantage over their global counterparts due to cheaper labor or raw materials. But their true edge comes from smarter engineering and more nimble organizational structures. A recent comparison of a relatively new Chinese OEM and a more established European OEM illustrates this.

In conducting a value analysis for the European OEM – looking at the values that they wanted to transport with their product and how this was translated into engineering - it became evident that some features had been over-engineered based on what was assumed to be of value to their customers. This, however, resulted in the OEM investing in features that customers didn’t actually feel were important.

Jan Schulte is managing director, North America, at POLARIXPARTNER. (POLARIXPARTNER)

Conversely, the Chinese OEM extensively analyzed actual customer needs for the price point and for the demographics they were targeting, avoiding putting features into a car which are nice to have but that drive up cost and were not aligned with customer needs.

To do so, they established a collaboration between engineering, marketing, market research and procurement, with all of them working together to clearly understand the client base, and then they invested in, and engineered for, the things that were truly important. Critically, once they had this information, they did not circle around a decision as European or Western OEMs often do, but quickly commenced production.

Western OEMS are often confined by their own organizational processes and decision-making hierarchies, which present challenges. Chinese OEMS just make a decision, period. The problem comes down to the size of organizations. Chinese startups, compared to European or North American OEMs, simply don't have the size of a GM or Volkswagen or Toyota - yet.

These smaller, more nimble organizations are speedboats compared to traditional OEMs and can make decisions much quicker. The result? They have the ability to develop a car in three years instead of five, and because they are faster to market, they can sell for two years more than a Western OEM, and can also adapt technology faster.

Some Western OEMs are beginning to embrace this approach. Volkswagen, for example, recently announced in 2023 that it would develop the ID.2, a small EV, in just three years. Organizations like VW, Audi and BMW, are establishing these “speedboat” models because they know change is essential to compete.

In large organizations, the approach is to carve out small engineering teams that have the ability to make decisions themselves and can accelerate the engineering process. But instead of reinventing the entire organization, start with a “speedboat.” Define a project that can serve as a case study for the rest of the organization, where you can develop and define a process, rather than trying to turn the entire engineering organization into a smart engineering approach, which could result in stress for an organization and that, in the end, would fail entirely.

Prescription for Smart Engineering Adoption:

Create an independent team: establish a small, agile engineering unit with significant decision-making authority.
Select a pilot project: choose a specific product line as a test case for the new methodology
Implement cross-functional collaboration: Integrate marketing, research, and engineering teams.
Focus on customer value: conduct deep demographic and market research.
Streamline decision-making: reduce hierarchical approval processes.
Embrace rapid iteration: develop faster development cycles with more flexible approaches.

As Chinese OEMS grow, eventually we might see consolidation to five or six dominant brands produced by three or four companies. With that, many of the organizational challenges faced by Western OEMs will develop in China as these OEMs become larger in size.

But for now, Chinese OEMs have a distinct advantage by defining their products in a smarter way. They are better at analyzing their customers to understand what they actually value in a product and not over-engineering it so it gets to market faster.

To compete more effectively, Western OEMs can adapt this approach, too. By embracing smarter engineering and adopting a speedboat mentality, even the largest OEMs can begin to level the playing field with their Chinese counterparts.

Jan Schulte is managing director, North America, at POLARIXPARTNER, a Roland Berger Company, and wrote this article for SAE Media.