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Why Your First Electric Car Might Be Chinese

November 4, 2022

By Paul Homewood

 

I did warn you!

 

 

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Tesla would have delivered more cars in the most recent quarter but for a shortage of boats. It’s having problems finding vessel capacity out of Shanghai. No wonder: China recently overtook Germany as the world’s second-largest car exporter.

China’s car exports rose more than 50% in the first nine months of 2022, shipping out more than 2-million vehicles. This isn’t just western carmakers using China as an export hub; home-grown brands are also finding their footing on the world stage. And demand is being led by Europe, the birthplace of the car, where a supply-chain crunch, energy crisis and war in Ukraine continue to hamstring manufacturers.

The threat is about more than price. Chinese-built cars are of far superior quality to those it tried to foist on European consumers more than a decade and a half ago. Europe’s carmakers are already losing market share in China due to a lack of competitive electric vehicles, and they risk doing so at home too, where Chinese carmakers already account for 5% of the EV market.

European politicians mustn’t be naïve but they should be wary of wielding a big stick: harsh new trade barriers on China would raise the cost of electric vehicles while lessening pressure on European automakers to boost their competitiveness.

China’s vehicle makers are making inroads after spending years preparing to meet growing demand for electric vehicles and the batteries that power them. Carmakers globally are partnering with Chinese battery makers to power their EV fleets.

Thanks in part to government largesse and an industrial policy that favoured domestic producers, Chinese EV brands dominate their rapidly growing local market, where they are looking to cut prices, which will further boost adoption.

China’s advance presents a thorny problem for European politicians, who are under pressure to ensure a level playing field. Currently, car imports into China face a 15% tariff compared to 10% when going into the EU.

Stellantis CEO Carlos Tavares wants Europe to raise tariffs on imported Chinese models. Meanwhile, French President Emmanuel Macron says purchase incentives should be contingent on local production, as they now are in the US following the Inflation Reduction Act. Germany, whose car industry has far more to lose if China retaliates, has so far been more reticent. German auto executives are part of Chancellor Olaf Scholz’s delegation of business leaders visiting China this week.

Europe is already worried about deindustrialisation due to its sky-high energy costs. There’s growing political concern too about the continent’s business dependence on China — a valuable trade partner but increasingly viewed as a strategic rival. The fate of industries like solar panels — where German consumers effectively subsidised the rise of Chinese manufacturers and domestic producers went bust — show the dangers of complacency.

While western carmakers overcame competitive challenge from Japanese and Korean producers in the past, the threat is bigger this time because EVs are a new technology and China is years ahead in batteries and associated supply chains. The EU reached a deal last week to ban sales of combustion-engine cars from 2035; so the continent’s manufacturers are stuck between a rock and a hard place.

Choking off Chinese vehicle imports may be politically popular, but European consumers will end up paying through higher prices and inferior products. Ultimately, Europe can choose protectionism or affordability. But regrettably it can’t have both.

https://www.bloomberg.com/opinion/articles/2022-10-31/china-s-evs-are-coming-after-fiat-and-volkswagen-are-bmw-and-mercedes-next?mc_cid=fab32283b3&mc_eid=4961da7cb1&leadSource=uverify%20wall

 

 

We’ve long known that China can undercut European manufacturing industry. But until now European carmakers have held a crucial technological advantage.

However as Bloomberg point out, EVs are a new technology, and by banning conventional cars, we are giving away that dominance.

16 Comments
  1. GeoffB permalink
    November 4, 2022 3:16 pm

    Net Zero is going to destroy the western car industry, as well as tier 1 and tier 2 suppliers, along with the machine tool industry. Maybe 2,000,ooo jobs.
    Iron and steel as well as aluminium already destroyed, cement soon to be gone, plastics industry next and for an encore lets destroy our chemical industries (ammonia). Probably 10 million jobs lost, that is a lot of solar panel cleaners and insulation installers….green jobs my *rse.

    • Realist permalink
      November 4, 2022 3:24 pm

      Net Zero is going to destroy the entire economy. Nothing functions without transport

    • JBW permalink
      November 5, 2022 10:11 am

      Don’t forget all those ‘telephone sanitisers’ we will need in the future:-)

  2. Realist permalink
    November 4, 2022 3:22 pm

    More like arm twisting by politicians and extortionate taxes, regulations and even threats of bans on what actual customers need than actual demand for EVs.

    >>growing demand for electric vehicles

  3. James Broadhurst permalink
    November 4, 2022 4:01 pm

    A Chinese supplier explained to me that the written specifications of his lithium batteries were an “aspiration”. Bloomberg’s assertion that they are “years ahead” is an unfounded opinion.

  4. Devoncamel permalink
    November 4, 2022 4:12 pm

    The latest electric MG4 model is aggressively priced to undercut much of the competition. It’s only the start.

    • November 4, 2022 9:13 pm

      China plays a long game. Back in 2000, my company made low volume tooling that was ~40% the price of production tooling but much quicker. China started selling prototype tooling made from production tooling materials for 30% of the price of production tooling. Tools are big and heavy so it made more sense to mold the parts in China as well. The molded prototype business (tooling and parts) moved to China. Soon the production tooling business and production plastic molding had moved there as well.
      Remember around 2005-2010 when the people making computer chips were going to make solar panels more efficiently? Germany was going to lead the way and many Silicon Valley hardware manufacturers took a shot at the market. The problem was that while manufacturing was efficient, the new solar panels they made were not. China was making traditional polysilicon base cells which was more expensive and energy intensive but they were more efficient when producing energy. The scale they worked at along with cheap and reliable fossil energy allowed them to improve the production process and they now dominate that market.
      China has a lot of coal to make power but not much oil for transportation. They had terrible smog problems which was due to use of coal for home heating and emissions from the millions of cars their citizens could afford. It made perfect sense from an energy security standpoint for them to push electric vehicles. They have cornered the markets for the rare earth elements used to make magnets for efficient motors and generators, they have strategically locked up the lithium supply and expanded their capacity to produce nickel and copper.
      The MG4 is selling for slightly more than half the price of a Tesla Model 3. China is looking to dominate the EV market that the western governments are mandating.

  5. Peter Yarnall permalink
    November 4, 2022 5:08 pm

    it won’t matter because when the ultra left rule the world, us plebs won’t be allowed cars…….or go on holiday……and especially not leave the country!
    You can’t possibly be allowed to see how the elites live.

  6. ancientpopeye permalink
    November 4, 2022 5:13 pm

    Not in my family for sure, the electric car bubble will go the same way as the Luddites.

  7. M Fraser permalink
    November 4, 2022 5:26 pm

    Battery vehicles will only be a success in China due to the huge amount of coal fired power stations producing electricity to charge them! Meaningless in Europe, NO power!
    Some might remember the Japanese destroying the UK motorcycle industry in the 1960’s not only by under cutting, producing oil leak free bikes but by buying up all the designers and engineers.

  8. Chris Phillips permalink
    November 4, 2022 5:41 pm

    I expect that when politicians panic in 2029 and realise there is not the charging infrastructure nor indeed the availability of raw materials to support going 100% to EVs, they’ll postpone the ban on ICE cars. By then though, all European manufacturers will have stopped making ICE vehicles – but China will gladly supply them.

  9. November 4, 2022 5:44 pm

    No harm would be done to the world’s climate if the West ended its crazy decarbonisation policy and the like.
    Taking account of manufacture, Lithium and disposal of batteries, EVs are a scam. Same for wind turbines and simply everything concerned with the myths of combatting adverse climate change.
    CO2 is not the villlain but essential plant food.

  10. Joe Public permalink
    November 4, 2022 6:33 pm

    “Tesla would have delivered more cars in the most recent quarter but for a shortage of boats.”

    I wonder what could have contributed towards that?

    https://www.telegraph.co.uk/business/2022/05/10/electric-cars-risk-wave-catastrophic-fires-cargo-ships/

  11. Chaswarnertoo permalink
    November 5, 2022 9:18 am

    90% of electric cars ever made are still on the road. 5% burned. And 5% made it home….

  12. Richard Bell permalink
    November 5, 2022 3:05 pm

    I recently met an Englishman in rural south of the UK who thought he was saving the world by driving a Chinese Electric Car …… the world has gone MAD !!!

    • Gerry, England permalink
      November 6, 2022 12:20 pm

      Did you put him straight on the child labour, slave labour, damage to the environment, increased pollution that his car causes?

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