Bloodbath in the making? Even Tesla under threat.
I’m worried.
The car’s most extraordinary feature, though, is its $9,698 price tag. That undercuts the average price of an American EV by more than $50,000 (and is only a little more than a high-end Vespa scooter). Such aggressive pricing by BYD, which surpassed Tesla Inc. in late 2023 to become the world’s largest producer of electric vehicles, is indicative of how Chinese auto manufacturers will likely force US makers to pivot away from mainly producing expensive second cars for the affluent and toward more reasonably priced EVs for the Everyman.
Just as the long-feared prospect of a revolutionary EV from US tech giant Apple Inc. has receded, American carmakers now face a possibly greater challenge from Asia. China, long a manufacturing hub for Western companies’ products, is hellbent on expanding its own companies’ reach around the globe. It’s already the biggest market for EVs, and it’s using that scale and manufacturing know-how to help expand sales of competitively priced Chinese models to an increasingly climate-conscious world.
For now, the Chinese onslaught is being kept at bay in America by stiff tariffs and moves to erect even tougher trade barriers against the US’s geopolitical adversary. But the Chinese market accounts for about 70% of all EVs sold globally, so China’s push to lower prices is causing a ripple effect that can’t be ignored in the long term—even if political maneuvering by American lawmakers manages to slow the Asian giant’s automotive advance toward the US, the world’s most profitable car market.
“This threat has put everybody on alert,” says Jeff Schuster, global vice president for automotive research for consultant GlobalData. “It forces innovation in a way that might not have happened as quickly.”
Auto executives and politicians in Washington are sounding the alarm about a potential existential threat to American car brands—and the millions of workers employed building them. The Alliance for American Manufacturing, a trade group backed by major manufacturers and labor unions, is calling for new protectionist trade measures against China to prevent an “extinction-level event.”
“Chinese companies are ultra-competitive today,” says Michael Dunne, an auto industry consultant who previously worked for General Motors Co. in Asia. “The question in every boardroom right now is, how do we compete with them?”
Ford Motor Co., Tesla and other carmakers are quickly tearing up their EV playbooks to compete against these cheap new vehicles sold outside the US. Ford Chief Executive Officer Jim Farley calls the Seagull “pretty damn good” and cautions that any automaker that can’t compete with the Chinese globally in the near future risks losing as much as 30% of its revenue. One of Farley’s top EV executives called Chinese EVs “a colossal strategic threat.”
BYD, the world’s largest electric vehicle (EV) maker, has priced another model under the 100,000 yuan (US$13,912) threshold as a discount war in China’s EV market intensifies.
The Shenzhen-based company, backed by Warren Buffett’s Berkshire Hathaway, announced on Wednesday that the updated fully electric e2 model will start at 89,800 yuan, 12.6 per cent less than the previous price of 102,800 yuan.
The compact sport-utility vehicle, with a range of 405 kilometres, becomes the fifth BYD model available for less than the psychologically important threshold price – viewed as affordable even for low-income wage earners in the mainland China market.
“BYD appears to be extremely aggressive in driving a transition from petrol cars to EVs in the country’s automotive industry,” said Eric Han, a senior manager at Suolei, an advisory firm in Shanghai. “The cheap models will also draw middle-income consumers who have become price sensitive amid a bearish economic outlook.”
If the workers who make the vehicles are not well compensated (or not compensated at all), the price can be low. If the materials are produced by unethical means, the price can be low. Is that the case here? I don’t know. To be sure, bloated exec pay helps make US vehicles expensive, but consumers need to know what enviro or human rights injustices they might be supporting with a $10 or $15k Chinese EV.
valid points. But if US carmakers completely lose out in international markets, that would not be a good thing.
That’s like saying – don’t support Walmart. The average person will care far more about their own wallet than the national and local effects. Practically every device around people’s homes these days have some part (or the whole of it) made in China. Don’t buy iPhones – they’re built in near slave like conditions in China – and so on. It’s unavoidable in our global and capitalistic economy – cheap labor is a major competitive advantage.
If the average consumer sees one product is $45K and a virtually identical product is $20K (I assume there will be import costs for BYD), it’s not difficult to figure which will be the better seller.
But, this isn’t likely to be a ‘winner takes all’ sort of situation. There WILL be consumers who only want American vehicles (at least, superficially American even if they’re made in Mexico). I also think there will be a LOT of American consumers who will simply refuse to buy an EV for at least a decade plus – the ‘Coal Roller’ market in the Heartland. What is most likely is that China will enter the U.S. market just like Japan and South Korea did – it’ll make a big splash, they’ll get a large chunk of the total sales, but they won’t drive every other competitor out of business – the others will pivot as needed (or go out of business – ha).
Above, a quote, which I think is a really good thing:
‘“This threat has put everybody on alert,” says Jeff Schuster, global vice president for automotive research for consultant GlobalData. “It forces innovation in a way that might not have happened as quickly.”’
How is that any different than any other car?
China also has the volume advantage. They got their infrastructure installed, inspired patriotic citizens to embrace EVs, are not burdened by the archaic dealership model of the US, and are sick to death of the chronic air pollution they grew up with (thought that is primarily from coal-burning and large diesel trucks).
The US is not virtue personified, either. Fruit and veg harvesting and bulk meat processing are notoriously left to undocumented immigrants because no sane American will do that work for such meager wages.
There’s a major disconnect in the US with respect to the earliest adopters of EVs: City commuters are happy if they can get a vehicle that comfortably gets them around town. US automakers are so addicted to oversized SUVs and pickups with high margins they missed the opportunity to get their foot in the door with more modern and conservation-minded folks who typically live in big cities. They might have gotten a clue if they noticed how many ICE Fiats and Minis are being sold to the young and/or urban car users.
A long time ago on your older blog I said we need a shopping trolley EV and here it is.
“is causing a ripple effect that can’t be ignored in the long term—even if political maneuvering by American lawmakers manages to slow the Asian giant’s automotive advance toward the US, the world’s most profitable car market.”
A lot of the profitability (and I’m not an expert on this topic) seems to have been driven by the same thing as in the 1970s – pretending global trends wouldn’t reach the US market. Then OPEC decided oil was a useful political weapon, especially when USA really needed more than we produced, and could also give them profits instead of the Western oil companies on their own land.
I’d bought my next door neighbor’s 1974 Monte Carlo (350 cu inch V8) right before gasoline prices doubled, and remember taking my dad’s Olds Custom Cruiser station wagon (455 cu inch V8 and seemed 100 feet long) to fill the tank on odd-numbered days during the brief rationing period. Suddenly Detroit decided small was good and our first options were things like the Vega (aluminum engine block bad!), the Pinto and other attempts. And suddenly non-luxury foreign cars from Asia came in and kept selling and kept getting better than the early models, since price-shocked car owners wanted to save money every trip to fill the tank.
But the gas-guzzler tax has loopholes you could drive an SUV, or van, or pickup through, ending the station wagon but bringing profits roaring back as vehicles got bigger again, so Detroit again seems to have again hit the snooze button on global trends, and they and the oil industry were happy.
So to people who follow the industry closer than me, how serious were US automakers about electrification before Teslas’ market capitalization blew past their combined values, while building cars here? Serious efforts, not the kind of development that looks green on paper but not at the factory?
Electrification will save consumers money, even with new-vehicle buys pretty soon, and the simpler platform is going to also cause pain like a whole bunch of robotification at once on the labor needed for manufacture and also maintenance. Does any kind of reshoring make economic sense, to take up labor with those skills? Automation’s still going to be growing, too.
So the industry should be worried, and there’s a lot of planning that should have been underway a long time ago. Again.