China’s electric vehicle industry has been accelerating at an unprecedented pace, with automaker BYD recently surpassing Tesla in global EV sales. Even Elon Musk, CEO of Tesla, has voiced his concerns, stating that without trade barriers, Chinese car manufacturers could “demolish most other car companies in the world.”
It seems that China’s dominance in the EV sector has triggered an alarm within the Alliance for American Manufacturing, which recently published a report titled: “On a Collision Course: China’s Existential Threat to America’s Auto Industry and its Route Through Mexico.” This report highlights the aggressive expansion of Chinese firms, particularly BYD, which is constructing factories in Thailand and Hungary to serve as regional export hubs.
However, what raises more eyebrows is the Chinese companies’ significant investments in Mexican plants. This strategic move could potentially offer a backdoor entry into the American market, bypassing the existing trade policies that have so far kept Chinese automobiles at bay.
The Rising Tide of Chinese EVs
US House lawmakers have also raised concerns about China’s industrial strategy, which appears to be geared towards dominating the global automobile market. They caution against Chinese EV manufacturers gaining a foothold in the US market through our key trading partners. The lawmakers have advocated for maintaining or even increasing the current tariffs on imported Chinese vehicles. They foresee a “coming wave” of Chinese cars exported from our trading partners, including Mexico.
Major Chinese car manufacturers, including MG, BYD, and Chery, have been actively scouting for manufacturing locations in Mexico, according to a recent report by the Financial Times. There has also been a significant surge in the import of Chinese cars into Mexico.
Government Backing and Competitive Pricing
While Elon Musk acknowledges the prowess of Chinese EV manufacturers, the Alliance for American Manufacturing sheds light on the substantial government backing these companies receive. The report suggests that Chinese automakers and suppliers, with the robust support of their government, have evolved into industrial powerhouses controlling the entire electric vehicle value chain.
BYD, recognized for its cost-efficiency and backed by Warren Buffett’s Berkshire Hathaway, owns the entire supply chain of its EV batteries, which significantly reduces the overall vehicle cost. As a result, BYD has positioned itself as a price leader in the EV market. Michael Dunne, CEO of Dunne Insights, a car consultancy focused on Asia, noted, “No one can match BYD on price. Period.”
Responding to the Threat
In response to the looming threat from Chinese EV manufacturers, Ford CEO Jim Farley recently hinted at a possible collaboration with rivals on battery production. Mary Barra, the GM Chief, echoed similar sentiments. However, the Alliance for American Manufacturing warns that the potential influx of cheap Chinese autos could be an “extinction-level event” for the US auto sector.
As the EV market continues to grow, the actions of Chinese automakers and their global expansion strategies will undoubtedly shape the future of the auto industry. The international community, especially the US, will have to stay alert and adaptive to effectively respond to these developments.
