China’s manufacturing industry remains unmatched and that’s concerning for Western powers. A country with its size, population, and government seems capable of continuing to make more business deals across the globe, spurring its economic growth. The rise of electric cars has increased China’s auto production and presence in several European and Asian markets. It has several American (and European) auto executives feeling nervous.
An Atlantic Council report explained that China’s battery electric vehicle (EV) exports rose 70% in 2023, reaching more than $34.1 billion. The European Union was the largest recipient, making up nearly 40% of China’s foreign exports. Non-EU members like Albania, the United Kingdom, North Macedonia, Ukraine, and European Free Trade Association members held 15% of the market.
Normally, more EVs on the road are considered good, but Chinese-Western political and business relations aren’t at an all-time high. America’s Big 3 (e.g., Ford, GM, and Chrysler, now part of Stellantis) are worried their business interests are at risk because of the rise of Chinese EVs.
Photo Courtesy BYD
“The dozens of car companies operating in China plan to put 71 new battery-electric models on sale this year,” Keith Bradsher, The New York Times reporter, wrote in a column about Chinese electric cars. “Many new models have taller hoods for a bolder appearance and more storage space. The cars have bigger tires that improve braking. The seats are thicker and more comfortable. The batteries are ever smaller, more powerful, and quicker to recharge.”
Combined with improving driver-assist technology and astonishingly low prices, it’s no wonder America’s auto industry is worried. These vehicles could disrupt the status quo even further. Over the years, the Big 3 has lost popularity due to foreign rivals (e.g., Toyota, Volkswagen, BMW) and domestic startups (e.g., Tesla, Rivian) offering more efficient, affordable options.
BYD and Nio are considered the two biggest threats as BYD already rivals Tesla in Europe and Asia.
The firm plans to build a Hungary-based plant for its European presence and a factory in Mexico, where the company says it will build 15,000 low-cost EVs a year for Mexican drivers. Nio has yet to profit from its EV sales but has pushed ahead with technological developments.
The BYD Mexico factory announcement wasn’t received well across the border. The Alliance for American Manufacturing said the move threatens jobs in the U.S. with American auto companies. The group asked Washington to block any importation of low-cost Chinese EVs and related parts.
Photo Courtesy Ford
Jim Farley, Ford’s CEO, expressed similar sentiments. As he leads the company into the electric era, he’s grappled with being outpaced and outperformed by Tesla, Hyundai, and others in zero-emission sales. He said that no matter how much he switches to hybrids, PHEVs, and battery EVs, nothing can compete with China’s prices.
“The reality is that regulators around the world, including the U.S., have put their foot firmly on the scale, and there is no amount of hybrid mix or PHEV mix in the world that is going to get you to be compliant,” Farley said in a Q3 2023 earnings call with investors. “And even if the federal government eases off with administration change, many of the states, large states that have lots of revenue in them, are probably not going to do that.”
“So the reality — but there’s a bigger thing, there’s a bigger thing here than the government. It’s called China,” he continued. “It’s called the BYD Seagull. It’s called a market that likely will sell 110 million EVs this year in China.”
The Seagull seemed to be the nadir for the Big 3. It reportedly costs under $10,000 before taxes and fees, lower than American, European, and non-Chinese Asian vehicles currently produced.
The hatchback has those worried that the 2020s auto boom in China will be like the Japanese one in the 1970s. Farley and other executives are worried that their gas-powered car sales will also be affected.
Photo Courtesy BYD Seagull
BMW, Renault, and Volkswagen asked the EU to loosen the 2035 gas car phase-out to sell as many cars as possible. Back home, the U.S. Environmental Protection Agency had relaxed regulations due to heavy auto industry lobbying. Environmentalists are less than pleased with these rulings.
Some of this was done to shed enough inventory to profit and to benefit the United Auto Workers union. The union, which was on strike, expressed concerns about EV-positive legislation’s financial effect on the production of gas trucks and SUVs, two of the biggest polluters on the road.
It’s been hard to slow down China’s economic rise, but Jameson Dow, Electrek columnist, made an interesting observation. He noted how American legacy brands tried to lobby the government to stop Tesla’s rise, but they could do nothing. Even with some anti-EV legislation by state and local governments, the company emerged as the victor.
He also pointed out that one of the big reasons was Tesla’s willingness to produce an efficient charging network, whereas others said charging was down to other businesses.
Today, Elon Musk’s company floats between the first and second-highest seller of EVs. The Model Y is the top-selling car in the world.
Photo Courtesy Charlie Deets
Dow wrote that America’s Big 3, BMW, Toyota, Hyundai, and others should be acting. It’s unlikely BYD or Nio will establish a strong presence in the U.S. The existing 27.5% tariff on Chinese imports effectively ends that possibility, but it’s even less likely now that the government also recently agreed to quadruple Chinese import tariffs. Any of these cars would likely have to be imported through backwater channels.
Despite these actions, American auto workers want more. They want a complete blockade on Chinese EVs. Meanwhile, Chinese-built cars like Volvo and Polestar — not restricted in the U.S. but still subject to the import tariff — realize their future in America is clouded by international commerce disputes.
The matter only gets more complicated when it comes to battery sourcing. Automakers are working with CATL, the world leader in high-performance EV batteries. Their batteries can be charged up to 370 miles in 10 minutes and 620 miles after 30 minutes.
This issue is another concern for the U.S. What if Ford, GM, and Stellantis can’t keep up simply by converting gas-powered models to zero-emission versions? Range anxiety remains one of the sticking points for hesitant EV customers. Sure, some players like Redwood Materials are building a domestic battery empire. However, it will take a vastly superior product to compete with CATL’s battery cells.
While some automakers are busy fighting the 2035 internal combustion engine sales ban, Ford is working on its EV business model.
It’s shifting to hybrid traditional models and creating smaller, affordable EVs to fight the potential arrival of BYD or Nio on American shores.
However, they are still worried. The MSRP on certain American-made EVs may still concern the American consumer as inflation and global conflicts continue to raise product prices.
Photo Courtesy CHUTTERSNAP
China’s growth has always been on American politicians’ and automakers’ minds. The rise of the low-cost EV has them reeling. After the president passed the Inflation Reduction Act, he signaled intent to revitalize the American auto sector, focusing on zero-emission vehicle production.
For America and its allies to lead on EV innovation, regulating Chinese EVs might help, but the Big 3 and local and state politicians still need to do their part.
In the meantime, American companies are making real progress. Tesla has already capitalized on the turning tides and more businesses are working with startups like Rivian for fleet conversion and charging network expansion.
“In refusing to act faster to accept the future that’s already here, automakers have already ceded ground,” Dow penned in his column. “Frankly, I’ve long said that I don’t care who makes EVs and that whoever makes them deserves the win,” he continued.” I’d prefer if my country got it together and did something that would benefit its competitiveness long term, but as a living creature on this Earth, my primary interest (and yours as well) is in solving the climate crisis.”
