Donald Trump is in Michigan telling gullible Auto Workers that the only way to sustain the US auto industry is “Drill Baby Drill”.
Reality check: EVs are here to stay, China is widening its lead in manufacturing them, and US auto makers risk extinction, in part due to lack of national commitment to new technology.
For most of this century, foreign brands totally dominated China’s car market. Every year, they sold millions of cars and earned billions in profits.
Chinese consumers swarmed into Buick, Volkswagen, BMW and Toyota showrooms nationwide, happy to pay cash for the prestige of owning a brand that wasn’t Chinese.
“China is our forever profit machine,” my colleagues at GM liked to humble-brag a decade ago, back when I ran GM’s Indonesia operations. “We can bank on an easy $2 billion dividend every year.”
Now, suddenly, that golden era is over.
Sales and profits in the People’s Republic are vanishing. And boards in Detroit, Wolfsburg and Tokyo are stunned by the speed and intensity of the changes.
Ford has lost more than $5 billion in China since 2020. Sales are down 70% from their peak. “We’ve never seen competition like this before,” says CEO Jim Farley.
GM is hurting, too. The former poster child for sunny US-China relations, GM has lost more than $200 million so far this year alone. That marks the first time in two decades that GM’s China operations have printed red ink.
Mary Barra says the situation in China is “unsustainable.”
Stellantis already knows the bitter taste of capitulation. Jeep was forced to beat an ignominious retreat from the China market in 2023 after its joint venture went bankrupt.
Detroit is not alone. Almost every non-Chinese brand – German, Korean, Japanese and French – is feeling shell-shocked as they watch their market shares disappear.
Plummeting China Sales
GM
2017: 4.1 million
2024: 1.8 million (f)
Hyundai / Kia
2016: 1.2 million
2024: 220,000 (f)
Volkswagen
2017: 4 million
2024: 2.5 million (f)
China’s No. 1 carmaker, BYD, on the other hand, has seen sales skyrocket.
BYD
2017: 420,000
2024: 3.6 million (f)
During the final years of the 2010s, the Trump administration proudly tore up dozens of policies meant to lower American greenhouse gas emissions and build a competitive domestic clean energy industry. It prioritized oil, coal and natural gas businesses over wind, solar and batteries, and as president, Donald Trump often seemed to revel in picking policies that would increase emissions by design.
These choices came with costs: American automakers failed to make their cars more efficient, and within a few years, they had fallen behind their international competition, especially South Korean and Chinese automakers.
Today, the United States finds itself badly lagging behind China not just in hybrid and electric vehicles but also in many other crucial industries: solar, wind and battery production, as well as the refining of some minerals. China now makes more than half of the world’s electric vehicles, and BYD, the Chinese automaker, is expanding so quickly that it has plans to open factories abroad in Europe, Central Asia, Southeast Asia and South America.
Driving China’s ascendancy is a massive and abrupt shift to electric vehicles. The EV share of total car sales will jump to almost 50% this year, up from just 6% in 2020.
Think about that. China has sprinted from 1 million to more than 10 million annual EV deliveries in just four short years. (I already see you dealership folks scratching your heads in amazement.)
Global automakers were caught flat-footed on EVs, lulled into complacency by years of winning at selling gasoline-powered vehicles.
Chinese automakers, in contrast, seized on the shift to electrics. This year, eighteen of the twenty best-selling EVs are Chinese brands. The other two are Teslas.
Advanced Technology
It is no secret that global automakers are finding it impossible to match Chinese competitors on costs. BYD builds cars 25-30% more cheaply than what global automakers can manage, thanks to extreme vertical integration, breathtaking speed and generous subsidies from the city, provincial and national government agencies.
But this is not just a low-cost, EV story. Chinese automakers now equip their cars with some of the world’s most advanced autonomous and digital cockpit features. Keep an eye on tech giants like Xiaomi and Huawei, which infuse their new cars with world-class software.
China’s strength is alarming even to mighty Toyota. In a 2023 interview with the Toyota Times, EV Chief Takero Kato recalled his shock during a business trip to China.
“For the first time, I came face-to-face with the competitiveness of the Chinese. Laying eyes on equipment that I had never seen in Japan and their state-of-the art manufacturing, I was struck by a sense of crisis. We’re in trouble!”
Chinese automakers tell me privately that they carry a deep respect for Elon Musk and Tesla. They tend to shrug with indifference at most of the world’s other car companies.
Those were the costs of just one Trump term. If Mr. Trump returns to Washington, he has promised to once again pull us out of the Paris climate agreement, which the United States had rejoined under the Biden administration. He again wants to kill the country’s clean car standards. And he’s threatened to cut off the generous federal subsidies for selling and building electric vehicles in the Inflation Reduction Act, President Biden’s signature climate policy. Although he’s recently softened some of his hate for electric vehicles — “you know, because Elon endorsed me very strongly,” he said in Georgia last month, referring to Tesla’s chief executive, Elon Musk — he still believes only a “very small slice” of cars should run on electricity.
Mr. Trump’s policies would devastate America’s growing electric vehicle industry. They would allow China to consolidate its control of the world’s electric vehicle and lithium-ion battery industries, and they would hamstring American — or European or East Asian — companies from developing the necessary expertise to compete with China.