The slowdown of EV sales in the United States is a problem created by automakers who were unwilling to see the looming threat of China and are now unable to build a competitive and affordable EV product. This was only exacerbated by a government slow to adjust to the looming new world order.
Of course, the same is true in Europe, where European automakers and policymakers have also been caught flat-footed. With the Geneva Motor Show underway, we’ve got a sense of what the Europeans are doing about it and, also, what China plans for Europe.
Chinese automakers, however, aren’t exactly in a great position. Subsidies can’t last forever, and China desperately needs new markets for its products. While China has the biggest EV market, there’s not enough demand to sustain the country’s EV industry. China has to do to the rest of the world what the rest of the world did to China in the ’90s and ’00s.
Mexico is the key, and a new report from an American manufacturing non-profit says we need to cut off Chinese EV automakers at the border or face an extinction-level event for U.S. automakers.
‘Motherfuckers just haven’t been paying attention’
If we tore down all the tariffs and just let anyone sell electric cars here would we be suddenly overrun with cheap Chinese cars? Probably. Most new vehicles aren’t affordable and a $15,000 EV with 250 miles of range like the BYD Seagull could absolutely smash here.
Are there major software and quality issues with Chinese electric cars? So far the biggest issues have been with American electric cars. The Chevy Blazer EV has been on a stop-sale for weeks after a raft of problems and now shipments of the F-150 Lightning have been halted.
There’s a great piece in Business Insider that goes into the rise of Chinese automakers, and it allows me to point out this great quote from Tu Le of Sino Auto Insights:
“The thought that Chinese-quality engineering and design are not as high quality as the legacy carmakers — that should be put to bed,” Tu Le, the founder of Sino Auto Insights, a consultancy focusing on the Chinese EV market, told me. “Right now, the legacies don’t have competitive products. There’s a vacuum. If China EV Inc. were allowed to enter the US today or next year, the legacies would be gutted.”
We are witnessing a shock to the global automotive order unseen since Japan barreled into the market in the 1970s. China’s EV ascendance has sparked a fight that is forcing companies to stretch the limits of their technological capability and policymakers to reimagine the ideological underpinnings of decades of trade strategy. What’s at stake is nothing less than a US industry worth $104 billion, about as much as Angola’s national GDP, and all the 3 million jobs that come with it.
“It’s a global game. It has been a global game,” Le said. “Motherfuckers just haven’t been paying attention.”
That could be a quote from The Wire and honestly, I’m not sure it isn’t. Someone check that for me. I had Peter put it in Stringer Bell’s mouth for our top photo because it’s an extremely Stringer Bell thing to say.
It’s true that the American car industry, by and large, did not see it coming. Nor did the European car industry. The article opens with a mention of Elon Musk laughing about BYD in 2011 and I’ve put the video up at the start of this article because Elon Musk is saying pretty much exactly the opposite now.
Here’s what Musk said on an earnings call earlier this year:
“Frankly, I think, if there are not trade barriers established, they will pretty much demolish most other companies in the world.”
I’ve brought this up before, but I got to go on a test drive in Detroit with BYD Chairman Wang Chaunfu in 2008 and his point was that China was actually ahead of everyone else because it was building cars, building infrastructure, and building scale.
He was mostly laughed off, but no one is laughing now.
The most brutal part of this article is the suggestion that the American automaker strategy is “making EVs that are just like combustion-engine cars but about $10,000 more expensive.” That’s an oversimplification, but it’s not entirely wrong.
The Chinese government has made no secret of wanting to be the most important global player in the 21st century, much in the way America was the most important global player in the 20th century. China is using its “Belt and Road” strategy of putting money into countries around the world, helping those countries develop infrastructure, much in the way America did in the middle of the 20th century.
To what end? It gives Chinese manufacturers new sources of commodities, new places to offshore manufacturing, and new customers. It also puts foreign governments in the position of owing money to China and, potentially, gives China new avenues for military development.
For the Chinese EV industry, new markets are an absolute necessity. As the CNBC article pointed out earlier this year, the Chinese EV industry is at risk of eating itself alive:
Competition is intensifying in the Chinese EV market, with BYD, Li Auto and Geely meeting their sales targets for 2023, and Xpeng and Nio falling short.
“Competitive landscape will be more challenging, and pricing pressure to ensue. Although EV demand is set to remain resilient, the industry will confront three major challenges on the supply side: overcapacity, new model launches and the rise of new tech entrants such as Huawei and Xiaomi, which point to growing competition,” Bernstein said in its note.
The answer, my friends, to Paraphrase Horace Greely is:
“Go West, young [EV Industry], go West and grow up with the country.”
Going West into the United States is a challenge for Chinese automakers, specifically because there’s what amounts to a 27.5% tariff on the import of Chinese electric cars into the United States.
China’s Moves In Mexico Are An ‘Existential Threat’ To America’s Auto Industry: Report
There’s no mincing of words today from the Alliance for American Manufacturing, which is a non-profit think tank created by the United Steelworkers union and American manufacturers. They call China’s plan to expand its footprints in Mexico a threat to the United States so real that it could wipe out our automotive industry.
Here’s a link to the full report, which I’ll quote from here.
It begins by going through much of what I reviewed above, specifically that:
- Chinese EV automakers are far ahead of the United States in terms of supply chain, investment, and product.
- The Chinese government wants/needs to build out manufacturing capacity and markets around the world
- The United States would be a great market for Chinese EVs if they could get here.
- Tariffs make that difficult.
So why is this such a big threat?
“The introduction of cheap Chinese autos – which are so inexpensive because they are backed with the power and funding of the Chinese government – to the American market could end up being an extinction-level event for the U.S. auto sector, whose centrality in the national economy is unimpeachable,” according to the report.
How does Mexico fit into all this?
For one, America and Canada have a trade agreement with Mexico that started with NAFTA and then was modified with the United States-Mexico-Canada Agreement (USMCA). While USMCA was designed to help fix imbalances in NAFTA, it also may have the indirect effect of helping Chinese automakers enter the United States via plants in Mexico.
From the report:
As such, following trends in other industries, including steel and aluminum products, production chains oriented around Chinese-owned and -affiliated companies are increasingly penetrating North American automotive supply chains via Mexico. It benefits from the USMCA’s liberal methodology for calculating regional content, which in turn can qualify it for the consumer tax credits that subsidize EV purchases in the United States. While Chinese auto part imports to the United States fell by 17% between 2017 and 2023 after a sustained period of growth, imports from Mexico grew by 20% during the same time.
The data strongly suggests that Chinese inputs are beginning to circumvent U.S. tariffs by entering through the southern border. “The leakage problem undercuts U.S. and North American workers by pitting them in competition against non-USMCA producers without commitment to the same worker, environmental, and consumer safety standards and without extending reciprocal market access to similar U.S.-based producers,” wrote the Economic Policy Institute’s Adam Hersh. “What’s more, the subterranean content can qualify for U.S. taxpayer subsidies under Inflation Reduction Act policies.”
The implication in this report is that not only could Chinese automakers overcome the current tariffs, but they could also potentially build vehicles in Mexico that could qualify for the $7,500 tax credits designed to encourage the development of the American EV auto industry.
So What Can America/Europe Do About It?
The report linked above makes the case that the “backdoor left open to Chinese auto imports” should be closed “before it causes mass plant closures and job losses.” In that report are specific adjustments to the USMCA, the enforcement of existing laws, and an increase in tariffs on both Chinese EVs and Chinese ICE cars.
Is anyone going to listen? Yes. There are many people making this point.
A bipartisan group of U.S. lawmakers has urged the Biden administration to hike tariffs on Chinese-made vehicles and investigate ways to prevent Chinese companies from exporting to the United States from Mexico.
A group of lawmakers urged U.S. Trade Representative Katherine Tai to boost the 27.5% tariff on Chinese vehicles and said her office “must also be prepared to address the coming wave of (Chinese) vehicles that will be exported from our other trading partners, such as Mexico, as (Chinese) automakers look to strategically establish operations outside of (China).”
You know what group probably also benefits here? The United Auto Workers and its members. The group has been extremely vocal in its fears of EV production being a race to the bottom in terms of wages.
Likely Republican presidential nominee and former President Donald Trump has already said he would impose a 60% tariff on all Chinese-made goods and implied that it could be higher for Chinese automobiles.
That’s all well and good. Most people on both sides of the aisle, in labor and in manufacturing, seem to think that cutting off Chinese cars in Mexico is a smart policy.
Is that enough? America may be able to keep China at bay in Mexico, but that doesn’t mean those same plants in Mexico can’t reach into Latin America and the rest of the world. American, European, Japanese, and Korean automakers can’t just rely only on tariffs.
If global automakers need to survive they need to be global, which means they need competitive products in markets outside of their own.
Geneva Motor Show Is A Mix Of European And Chinese Hybrids And EVs
While the American government is likely to slow its EV car rollout, the same may not be true in Europe where both the local geography and local car tastes make EVs a little more palatable to a larger population.
The Geneva Motor Show kicked off this morning and on display were a few interesting vehicles.
There’s the BYD Seal U DM-i, which is an attractive hybrid crossover using the company’s “Super DM” technology, which is the grandchild of the car I drove with the BYD Chairman back in 2008. This is a small (probably 1.5-liter) gasoline engine and maybe a 26ish kWh battery pack good for more than 50 miles of all-EV range. We don’t have any tech details or costs, but this is something that BYD could maybe sell in the $30-40k range, if not a little cheaper.
Then there’s the MG3 which comes from MG, the now Chinese-owned carmaker. This is another interesting hybrid, offering a mix of pure EV or hybrid modes:
Producing a combined 143kW, the MG3 Hybrid+ returns economy figures of 64mpg (4.4l/100km) and 100g/km CO2*. This is aided by a 1.83kWh battery, allowing for an extensive electric-only driving range – significantly boosting efficiency.
The all-new MG3 features a 75kW 1.5-litre petrol engine and 100kW electric motor, as well as separate generator motor which enables a wide variety of powertrain operating modes. This not only provides class-leading performance figures for a hybrid B-segment hatchback, but also allows for flexible running no matter the driving environment.
The interesting thing here is that the car has both a regular motor for driving as well as a generator motor. This isn’t a plug-in, unlike the BYD Seal.
And what of the European automakers? The new Renault R5 EV leaked this weekend. We’ll have more on that later, but it’s a “right-sized” EV offering about 249 miles or 186 miles of range at a cost that’s more competitive with Chinese offerings (about $30,000 before any incentives).
Europe is an important market for the Europeans, obviously, but also for Chinese automakers, with BYD in the early stages of its Hungarian production operation.
What I’m Listening To While Writing TMD
Chinese rock band Queen Sea Big Shark seemed like a good fit for this morning. No reason.
The Big Question
Would allowing Chinese automakers to funnel cars in via Mexico be an extinction-level event for American automakers?
Just ban every car not made in the US and be done with it. Look at the Brazilian market, that worked out great. /S
On the one hand, I don’t want domestic manufacturers to go out of business or all those jobs to be lost, and I agree with restricting Chinese vehicle sales.
However…
There really is nothing in the affordable economy car segment here. People who need affordable economy cars aren’t buying domestically-produced cars, or really any new vehicles in general. So maybe allowing just a few Chinese cars wouldn’t be the end of the world? Restrict them to the low end of the market only, perhaps with a cap on how many they can sell per year (like Japanese manufacturers had in the U.S. in the 80s), so they can only sell inexpensive economy cars here – no pickup trucks, no luxury SUVs.
A certain segment of buyers will always buy domestic, especially if domestic brands are the only way to get a full size truck.
Plus I’m almost ashamed to admit how much I like the idea of that MG3. I’m a sucker for dual-engined vehicles, okay? The idea of a hybrid with separate engines for driving and generating electricity is fascinating and incredibly novel, and it’s packaged in an attractive little hatchback that comes in fun colors. You gotta admit that’s an appealing product. For all I know it could be trash, but it’s interesting trash and I kinda want it to be not trash.
My biggest problem with the USMCA agreement is that you cannot pronounce it as an acronym like you could with NAFTA. I am even more pissed that USMCA could be easily rearranged to be CAMUS. That is a proper acronym! But, no, the US just has to be first in the list. Would it have killed us to let Canada take the first position on this one‽
“people don’t trust Chinese brands”
at a certain price point maybe, but the people that say that buy all their tools at Harbor Freight.
Do you need an air compressor only one time? Harbor Freight Tool is here for you.
China is already using Mexico to import fentynal. Why not cars?
https://nypost.com/2023/02/18/tracking-fentanyls-deadly-path-china-to-mexico-to-america/
https://abcnews.go.com/International/wireStory/guatemalan-accused-importing-fentanyl-precursors-mexican-cartel-arrested-107347006#:~:text=Mexico%20and%20China%20are%20the,fentanyl%20are%20coming%20from%20China.
Remember the Ford Fusions that had drugs in them smuggled up here?
that said, elon said they might turn a profit in 2013.
2020 was the first full year profit for tesla.
If anyone from the CCP has any ties to the company, ban it. Nothing from it allowed in.
China runs on slave labor, we should do nothing to help it. Not to mention it steals everything from our country and works to destroy it by policy.
Are you prepared to be unable to purchase pretty much anything? Are you prepared for irreparable infrastructure damage to things like the internet and manufacturing as machines fail out and neither parts nor replacement machines are available? Are you prepared for cell phones and cars to become far more unobtainable than they were post-pandemic during the chip shortages? Are you prepared for the collapse of the American economy, and the bankruptcy of a large percentage of American companies? Are you ready for 50%+ jobless and a return to breadlines?
Look, yes, China is really horrible with human rights, but there simply *is no replacement for the things it produces for us* in the entire world. Just trying to cockblock them would hurt us far more than it would ever hurt them.
Yes.
Do you think it was wrong to do the civil war too? Because that’s what your saying, it wasn’t worth it and slavery was better than all those people dying and business that struggled or closed during that time.
We have the capability to do everything china does, and respect the workers. Just because we don’t, doesn’t mean we can’t. Companies that depend on china, can burn and new ones will rise from the ashes.
Anything for your comfort, fuck those Chinese losers right? Should have been born in a better country, not your problem. You need some new cheap toys.
We do not have that capability, and anyone telling you otherwise is lying.
We can though. And most of the world has already started abandoning china as far as production goes. Vietnam, India, Mexico etc… are the new frontiers. Covid lockdowns and port issues really scared a lot of companies. It wouldn’t be nearly as painful as you are making it sound.
It would, because a whole lot of stuff is still only manufactured by China. Spinning up new manufacturing and fabrication takes *years*, and since the rest of the world would be unlikely to follow us, we’d have to spin them up *here.* Do you know why we don’t make anything anymore? Because only the rich would be able to afford it if we made the components here.
Oh, and as for your statement about me being against the civil war? Go fuck yourself, little man.
No need to throw personal attacks.
The point being made is that modern slavery is no better than historic slavery, and we should be just as willing to tolerate suffering to end modern slavery as those who went to war to end historic slavery.
If we really wanted to end slavery by cutting off nations that permit it, it wouldn’t involve years of private industry spooling up capacity. The government could have it done in months, similar to how we mobilized for World War II. It would take political motivation we simply do not have right now because the wealthy are fat and happy and don’t want to rock their luxurious boats. Some products would be more basic at first, but not for long.
We would certainly end up in a far better position than we are now, because US labor would have leverage to claim the same wage increases that the CEOs have gained since the 1950s. Our economic distribution is already dangerously top-heavy and getting worse, and this would solve that issue, too.
Again, wrong. The government was able to spool up munitions manufacturing in the US because we already had a manufacturing base. We lack that now.
One question this issue brings to mind is why do we perceive the auto industry as different from any other? Everything from t-shirts, sneakers, computers, phones, food, steel, and so on ad infinitum, is made cheaply overseas and embraced here in the US. Hell, Walmart (just one example, not picking on them) would be out of business without cheap imports. Sure, there are some level of tariffs on all of these, but not the levels imposed (and suggested) on Chinese automobiles (or small trucks from anywhere). We’ve allowed generations of industries from textiles to steel, to wither on the American vine in search of cheap alternatives without so much as boohoo over all those US jobs lost (excepting in those places directly affected, of course). So why the chauvinism for the domestic car industry? Is it because of the consortium of energy and auto lobbyists that influence political decisions and buy legislation with mountains of cash? Is it because we think of the automobile industry as having been invented here so there’s some kind of provincial snobbery that colors our national opinion? Would we feel differently if our industrial base had been bombed flat in two world wars like the rest of the industrialized world, thereby negating a half century head start we had in establishing automotive dynasties? I guess that’s more than one question. I’m not arguing for or against tariffs or predicting Carmageddon if the Chinese do move in. I’m just wondering why the car industry has become the line in the sand when, in reality, it’s no different than the others where we’ve ceded dominion in our markets.
Because there’s pride in the auto industry. I strongly believe that if countries weren’t so focused on ‘preserving their national automotive identity’ that we would have far fewer car brands than we do now and that consolidation (read: Stellantis) would have happened several decades earlier.
well said. The people that took all those jerbs and sent them overseas for all that sweet sweet shareholder value surely don’t care, but riling up idiots to think that they do sure is easy.
I love the irony of a country that literally forced another to open its markets at gunpoint is complaining of opening their own markets to competition.
Not a big threat
1. Elon charging network is going to be standard. Don’t allow the Chinese they need to build a network.
2. Most states require dealers don’t allow Chinese military or government to be dealers
3. Lawsuits fighting stolen technology could stop the Chinese for a few decades
4. I think the slave labor requires the whole company to be slave free not just what is imported.
5. Quality in China is job none. While some like Tesla buyers buy junk on marketing promises I doubt everyone wants to risk even $15,000 on a Chinese no dealers or repairs or maintenance available in the entire USA.
6. TO succeed China will need to share their technology with mechanics in the US for repair an maintenance. They don’t trust anyone because they stole the tech first.
7. The EV market is still less than 10%. Even if the entire 10% buys Chinese there is 90% of the market untouched. BECAUSE EVS DONT WORK IN 90% OF THE USA. AREA WISE.
#3 At this stage, their EV innovation/ technology is probably ahead of the Big 3. Not to mention a lot of the tech inside their EV are actually from the US companies.. eg Qualcomm, Nvidia, Bosch, Wolfspeed for Si Carbide chips, Luminar for Lidar. Just like when US Government was worried about DJI drones, the drones actually uses Intel processors ie Intel inside.
I can see they start selling EV motors and accessories on AliExpress to conquer the EV conversion industry.
I think the slave labor requires the whole company to be slave free not just what is imported.
No problem. All China has to do is adopt the 13th amendment into their own legal system.
Yeah please explain your reasoning, because Chinese sympathizers much like Facebook lawyers and conservative deniers claim legal arguments that make no sense and don’t pass muster. In fact the same as Senators, congressman, and presidents
Yeah please explain your reasoning
Here, read it for yourself:
Now read about how its used to keep slavery nice and legal right here in America:
From the moment they enter the prison gates, incarcerated people lose the right to refuse to work. This is because the 13th Amendment to the U.S. Constitution, which protects against slavery and involuntary servitude, explicitly excludes from its reach those held in confinement due to a criminal conviction.
https://www.aclu.org/news/human-rights/captive-labor-exploitation-of-incarcerated-workers
Wrong working in prison is a voluntary thing most incarcerated like to escape boredom. They aren’t in slave gangs anymore. They have AC and heat and cable TV. IN fact they have better free living than poor and older tax paying citizens who are taxed out of their homes to pay criminals to live in freehousing the rest of us pay for. If they don’t like it don’t commit crimes. As opposed to Chinese criminals being arrested for not being communists. Apples to orangutans isn’t a fair comparison.
Sure, you keep telling yourself that:
Incarcerated individuals are stripped of their right to refuse work. Three out of every four incarcerated individuals reported being forced to work under the threat of additional punishment, such as solitary confinement, denial of sentence reductions, or loss of visitation privileges. Denying incarcerated workers fair wages and safe working conditions is a violation of fundamental human rights. Moreover, the prison labor system disproportionately affects marginalized communities, particularly Black people and persons of color, as a result of their overrepresentation in the prison population.
https://freedomnetworkusa.org/2023/08/11/forced-labor-in-prisons/
Most US Prisons don’t even have business production jobs. I love how you and the liberal source think required chores as a parent would require of a child is forced labor. Heywhy not sue your parents for making you brush your teeth and comb your hair or cutting the grass?
Whatever. Sticking your fingers in your ears and refusing to accept reality does not change the reality that the US constitution right now in 2024 very literally PERMITS SLAVERY.
The point is if China wants to get the US off its back all it needs to do is adopt the wordage of the 13th amendment into its own laws, then rub it right in our faces when anyone in Washington complains.
Yes being forced to work 16 hours a day mining dangerous ores at threat of death for you and your family is exactly the same as having to work the lunch line for 2 hours in the AC and all the protection the system gives felons. Yes exactly the same. In fact if you offered US prisoners and Chinese prisoners the opportunity to switch I am sure everyone would choose to be Chinese prisoners.
The people doing labor on prison farms are working the same plantations that slaves were working. This widely distributed AP article from last month was eye opening for me.
Hidden prison labor web linked to foods from Target, Walmart | AP News
Truly horrendous and hidden is a sign they know it. Dozens of states are trying to overturn it, the media is exposing it and soon it will be overturned with lawyers seeing and prisoners getting justified compensation. In China they just kill the prisoners and the journalists become the new workers. See differences?
I never said it was the same. I said it was slavery. Literally.
Your problem was with Chinese slave labor. I pointed out the US has a provision for slave labor literally written into its constitution and has done exactly the same shit with it that China is doing now.
I personally would like to keep paying more for crappier cars because domestic producers don’t want competition.
Everyone here hates the chicken tax, the 20 year import ban, etc. You should hate this. Tariffs just let domestics charge more for less.
But it will destroy the industry!!!
Maybe maybe not. But if it does, the consumer savings can be spent on other things, making consumers richer.
Worried about the people? You definitely should be. Start thinking now about how to reskill people or increase productivity at North American plants.
Fighting lower prices with tariffs just makes everyone poorer – except maybe the government I guess.
Allowing stolen technology to ruin the industry it created is a bad idea. And sets a precedent to let them steal and take over other industry. And ever since they created Covid I kind of think we should block everything they do. Yeah killing more people than Stalin isn’t a big deal to cheap ignorant sociopaths. But me I got low standards and won’t stand for it.
Hmmm. How quickly you forget the roots of US agricultural and industrial prosperity. Great Britain would like a word with you.
But Great Britain had to grow elsewhere
The spirit of most tariffs is to protect a market that is being served by indigenous businesses. The US automakers are only serving the luxury and near luxury market. Maybe just tariff entries that compete there? They are not serving the affordable market, so in effect the Chinese are not their competitors. It’s unlikely the US domestic producers are going to lose $90K luxury SUV buyers to $15K affordable commuter cars. It’s more like the Chinese are creating and serving an entirely different market segment. If anything, they are stealing business form the used car market. That and the shoe makers and public transit.
This comment was inspired by your reference to the chicken tax. The chicken tax is not protecting (or even needed to protect) the marketplace for gargantuan trucks as personal transport. It just eliminates the entire segment of smaller urban friendly work vehicles for the people that seek those.
Could the Chinese government brick all the EV’s they sold in the event of conflict?
or light them on fire and take out whole neighborhoods. I am sure its not set up for it, but it certainly could be with a OTA update.
A $15,000 EV with 250 miles of range like the BYD Seagull could absolutely smash here.
It WOULD go great with my $225 Seagull 19 based chronograph watch.
Unpopular opinion: If China is going to dump stuff here- which with their heavy subsidies make their cars cheaper than what they cost to produce meets that definition then yes- we should place tariffs on their cars. They ALSO place heavy tariffs on our cars there so its only fair.
But Ford… GM… Chrysler need to get their shit together. They put themselves into a very compromised situation where they are so heavily dependent on full sized trucks and forgettable crossovers. They have priced these all at such nosebleed levels- those trucks in particular- that Murican’ or not, if those Chinese EVs ever make it here then yes- they would be SCREWED.
But if the US auto industry fails that means millions of people will be out of work which would have a pretty nasty trickledown effect on the overall economy.
I get a bad feeling that we can’t stave off Chinese cars forever. The US automakers have some time to get it right. But not by much.
Well the irony is that Ford and GM do a lot of their new car R&D and manufacturing in China. They’re trying to toe that line between getting the fiscal benefits from doing that while still making sure that real Chinese cars can’t be sold here. Meanwhile they themselves ironically sell Chinese cars in Mexico (Chevy Captiva a rebadged Baojun, Ford Territory a rebadged JMC, Dodge Journey a rebadged Trumpchi).
Ford Truck buyers are subsidizing their failed EV effort. I am looking forward to them cutting the shit and lowering their prices back. The discounts are already starting so fingers crossed.
The US auto industry is repeating the playbook that let Honda and Toyota eat the lunch their workers sometimes left in door panels. It’s wild.