China is worrying automakers around the world. Domestic automakers, aided by generous state subsidies, are churning out shockingly cheap electric vehicles at a relentless pace, saturating the domestic market and threatening foreign EV makers.
But a senior Chinese official suggested Friday that they may be on a roll.
To address what Xin Guobin, vice-minister of the Ministry of Industry and Information Technology, called the “blind” construction of new EV projects by some Chinese automakers and local governments, i.e. not justified by demand, The Chinese government said it would take “strong measures”.as reported by financial times.
His comments came amid pressure from Europe, particularly over the large number of low-cost Chinese EVs hitting the market.
“Their prices are kept artificially low by huge state subsidies. This distorts our market,” European Commission President Ursula von der Leyen said in September. . “Just as we won’t accept this distortion from within the market, we won’t accept this from outside.”
Indeed, EU officials are more concerned about the threat posed by Chinese EVs in the long term than the current reality. In Germany, the EU’s car manufacturing hub, Chinese EVs still have a small market share. But its growth has been rapid, even as German automakers with strong business in China have warned of tariffs on Chinese-made EVs, fearing retaliation from the Chinese government. Many large countries are concerned amid a new economic crisis.
EU investigates Chinese subsidies
EU investigators are expected to visit Chinese EV makers BYD, Geely Automobile and SAIC Motor in the coming weeks as part of an investigation into whether they are reaping unfair advantages thanks to government subsidies. The visit, part of an EU investigation announced in September and scheduled to run for 13 months, will help the EU decide whether to impose higher tariffs to protect European carmakers. .
Of course, there are other effects besides subsidies. “Chinese car companies are very competitive,” Tesla CEO Elon Musk said. new york times Last year’s Deal Book Conference. “China has very good manufacturing and the work ethic is incredible.”
Musk has suggested that Chinese companies will emerge as dominant players in the global auto industry, a big change from when he laughed about the quality of BYD cars in 2011.
Chinese EV manufacturers also have an unrivaled level of supply chain efficiency. For example, BYD keeps costs low by owning the entire EV battery supply chain, which is important since batteries account for about 40% of an electric vehicle’s price. The Chinese automaker, backed by Warren Buffett’s Berkshire Hathaway, recently overtook Tesla in global sales of electric cars.
Chinese EV makers face a 27.5% tariff in the US, but just 10% in the EU. This has led them to target Europe as their home market becomes increasingly crowded, but they are also rapidly expanding to other regions such as Southeast Asia and Latin America.
Last year, an Allianz Trade report said Chinese EV makers posed a serious threat to European automakers, particularly “the car-dependent economies of Germany, Slovakia and the Czech Republic.” The report called for higher tariffs on Chinese EVs, estimating that they could cost European carmakers €7 billion a year in lost profits by 2030.
According to Reuters, in the EU, Chinese-made EVs typically sell for 20% less than those made locally, and their share of the EV market, which has grown to 8%, could reach 15% by 2025. There is sex.
The wave of Chinese-made EVs has arrived in the US
Last year, BYD launched the Seagull EV in China at an unbeatable price of about $11,000. It quickly became one of the best-selling EVs in China. Seagull and similar models made in China could become a disruptive force in overseas markets.
Eventually, Chinese EVs may become a common sight on American roads.
“Nothing can match BYD on price. Times have changed,” said Michael Dunn, CEO of Dunn Insights, an Asia-focused automotive consultancy. financial times Early this month. “Boards in the United States, Europe, South Korea and Japan are in a state of shock.”
Chinese-made EVs are sold in more than 100 countries, but the U.S. is the only market “that hasn’t really hit the ground running yet,” says Michael from ZoZo Go, an advisory firm specializing in the Chinese EV industry. CEO Dan says.said to wall street journal.
Chinese EV makers are currently looking for manufacturing sites in Mexico, which has free trade agreements with the U.S. and Canada, potentially providing a backdoor into those markets, a scenario U.S. lawmakers have warned about. are doing.
Meanwhile, US automakers have significantly scaled back their EV ambitions after making large initial investments as demand was not as strong as expected. In a sign of the times, all four major U.S. automakers decided not to advertise during the Super Bowl this year — the first time in 23 years.
But the threat from China has industry leaders on edge. Last summer, Ford Motor Company Executive Chairman Bill Ford Jr. warned that the U.S. automaker was “not yet ready” to compete with Chinese rivals in electric vehicles. “It was developed very quickly, it was developed on a large scale, and now it’s being exported,” he told CNN. “They’re not here, but we think they’ll be here at some point, and we need to be prepared.”