US Carmakers Suddenly Aware of Chinese Threat

What was your first clue?
I’ve mused about what might have been for the US Auto industry if they had continued to build on the tech platform that was the EV1 – General Motor’s first modern all-electric vehicle, back in the 90s.
Meanwhile, the Chinese, determined not to lose out on this industrial revolution, have forged ahead on clean energy, and more recently, Electric Vehicles.

Axios:

American automakers increasingly view Chinese electric cars as an existential threat, despite the fact that Chinese-branded cars aren’t even for sale in the U.S. yet.

Why it matters: For big legacy automakers like Ford and General Motors, budget-priced Chinese cars represent another Tesla-like seismic disruption.

The big picture: The entire industry is worried about the magnitude of what Stellantis CEO Carlos Tavares calls “the China offensive.”

• Companies that can’t match China’s low-cost electric vehicles (EVs) “are going to be in an existential problem,” Tavares told Bloomberg.
• Even the indomitable Tesla CEO Elon Musk is concerned, warning that without trade barriers, Chinese automakers will “demolish” global rivals.

Catch up fast: China is the world’s largest and fastest-growing automobile market.

Psst. Chinese EVs are already here. They're just badged as Swedish brands, Volvo & Polestar (both majority owned by Chinese EV company Geely). Volvo's upcoming EX30 hatchback will be produced in China and Polestar 2s are as well. https://t.co/oFQ0kK0UWJ

— Jesse D. Jenkins (@JesseJenkins) February 14, 2024

• Chinese cars have long been poorly made. But thanks largely to government support — plus access to cheaper batteries and labor — the country now makes attractive, affordable models, like the sub-$11,000 Seagull EV from BYD, the world’s top seller of EVs and plug-in hybrids.

Yes, but: Chinese automakers built too many factories, forcing them to look to foreign markets like Europe for continued growth. 

• The U.S. could be next, where there’s a big opening for budget-priced EVs, despite stiff Trump-era tariffs on Chinese cars.

Driving the news: Ford, GM and others see the writing on the wall, and are reassessing their strategies and cutting budgets to stay competitive. 

• Even Tesla is scrambling to keep pace with low-cost Chinese manufacturers by slashing prices and working to develop a cheaper EV by 2025.

Zoom in: Ford is forecasting continued heavy losses in its EV division — one analyst figures it will lose a whopping $55,000 on every EV it sells this year.

• The company is cutting $2 billion in spending and de-emphasizing electric SUVs in favor of smaller, more affordable EVs.
• Ford CEO Jim Farley also recently disclosed a secret project to create a flexible, low-cost EV platform.
• “All of our EV teams are ruthlessly focused on cost and efficiency in our EV products because the ultimate competition is going to be the affordable Tesla and the Chinese [automakers],” Farley told analysts during a recent call.

Meanwhile: After boasting for years that it’s “all-in on EVs,” GM now plans to launch plug-in hybrid vehicles in North America to meet emissions targets while fully-electric sales slowly ramp up.

• “I don’t discount any competitor,” GM CEO Mary Barra said of China on a recent call with analysts.

Inside Climate News:

First, some context: 

Pessimism about the EV market gained momentum last year when Ford and General Motors said demand for the vehicles was falling short of expectations and pared back aspects of their EV plans. At the same time, Tesla warned investors of “enormous challenges”related to the production and rollout of the Cybertruck. Some auto dealers raised concerns about difficulty selling EVs, including a coalition of more than 4,700 dealers who wrote to President Joe Biden asking him to slow down on rules that encourage the shift away from gasoline.

These problems get amplified by commentary, often from partisan sources, that seem eager to hold a funeral for the energy transition. A recent opinion piece in The Hill has this headline: “As demand for EVs plummets, Biden’s green fantasy is pummeling U.S. auto dealers.” The author, Mandy Gunasekara, was chief of staff at the Environmental Protection Agency during the Trump administration and is now a visiting fellow at the Heritage Foundation, a conservative think tank.

Despite the storm clouds, sales were strong in 2023. U.S. consumers bought 1.19 million all-electric vehicles last year, up 46 percent from the prior year, according to Cox Automotive. EVs had a 7.6 percent share of overall car and light truck sales, up from 5.9 percent in the prior year.

It was the first time U.S. EV sales reached 1 million in a year.

So what does 2024 look like?

I gathered 2024 U.S. automotive forecasts from AutoPacific, Cox and S&P Global Mobility. Their projections show increases in EV sales ranging from about 20 percent, from AutoPacific, to more than 30 percent from the others, compared to the prior year.

“EV sales are increasing faster than any other segment in the industry,” said Michelle Krebs, executive auto analyst for Cox.