March 4, 2024 - 7:00am
Over the weekend Mathias Miedreich, chief executive of the battery-maker Umicore, told the Financial Times that Chinese electric vehicles (EVs) are beating out their American counterparts in the market. “They are just good cars and people buy them,” he told the paper. “American producers seem to struggle to bring good electric vehicles to the market.”
The statistics show that Miedreich is not exaggerating. EV sales in China rose 36% to 7.7 million in 2023, up from 5.7 million in 2022, according to data from the China Passenger Car Association in the FT. Chinese-made cars make up a full third of the total passenger vehicles sold in China. The American market is nowhere near as large, clocking in at only 1.5 million in 2023. The relative size of the markets provides some explanation as to why the Chinese models are now in higher demand.
Last week, Joe Biden stated that Chinese smart cars are a threat to national security. The American President stated that the cars are connected to the internet “like smartphones on wheels”, and that they could be used to collect sensitive information on American citizens. But China already has a large presence in the American smartphone market, and the Chinese dominate the market for laptops, with over 80% of laptops bought in the United States being Chinese-made. So why would the country not just spy on people through their laptops and smartphones instead?
This speaks more generally to the American-led strategy of so-called “derisking”. The US government is telling both its citizens and its allies that it needs to wean itself off Chinese products that are a threat to national security. But as the EV example shows, the case can be made that basically any product that can be connected to the internet is a potential threat. It is very hard not to think that the United States is simply falling behind in its capacity to lead the world in new technology and is using national security as a pretence to convince American citizens and other countries to buy their inferior products.
Biden’s own statements suggest as much. “China is determined to dominate the future of the auto market, including by using unfair practices,” the President said last Thursday. “China’s policies could flood our market with its vehicles, posing risks to our national security. I’m not going to let that happen on my watch.” In reality, Biden is simply describing global market competition. Phrases such as “dominate” and “flood” merely reflect the fact that China is producing better, cheaper products than its rivals.
It seems highly likely that the United States, and probably Europe too, will pull up the drawbridges on global trade to support their inferior car industries. Perhaps this is necessary to maintain jobs — especially with high energy prices in Europe. But it also means Western economies will fall behind China as their industries are insulated from the competitive pressures that spur innovation.
This may not seem like a problem to some. Even if the Chinese power ahead and produce world-leading technology, we can just make and buy our own inferior technology. This is no doubt true, but the rest of the world will not follow suit. There is every chance that if these policies are pursued, in ten years’ time a Western visitor to Moscow or New Delhi will see more modern vehicles in those cities than in London or New York. And our power and influence will wane accordingly.
Philip Pilkington is a macroeconomist and investment professional, and the author of The Reformation in Economics
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SubscribeWhere does the author actually establish that Chinese technology is more advanced and superior (“world leading”) to US and Western technology ? I find no evidence in this article.
The statement that China produces 80% of laptops certainly isn’t. Yes, it assembles 80% of laptops. That’s really not very difficult. The really advanced chips within the laptops are almost all designed and sold by US companies.
The Chinese end of the EV market is low value and very low (if even positive) margin. Three German car makers – Mercedes, BMW and Audi – have made 50% of profits in the worldwide car industry for the past couple of decades on less than 15% of global sales. Similar to what Apple does with smart phones. This is not by accident.
The Chinese are buying market share in this as in many other industries. But subsidising your way to huge sales is not a recipe for long term success.
The author is certainly technologically illiterate. And quite possibly economically so as well.
Chinese companies own the majority of intellectual property for commercial battery material and battery production technology. All Western manufacturers are licensing or buying direct from China. Even Tesla buys batteries from BYD for its Model Y. Tesla has struggled to bring its 4680 battery to commercial production, BYD is already selling them to third parties. China isn’t buying market share, they are global leaders in a technology Western leaders have insisted their consumers buy.
That is necessary, but not sufficient. The US are still the leaders in all the really advanced (difficult) technologies – the advanced chips and software.
And the Chinese are resorting to dumping EVs abroad at a loss as their domestic market saturates. Yes, that is a serious threat to Western car makers who’ve got used to the absurdly high car prices of recent years (during and post-Covid). And the support of regulators like the EU who are colluding in ensuring accelerated planned obsolesence of tens of millions of perfectly good cars already on the road. Has their ever been a better example of regulatory capture than the emissions cheating scandals in the EU ? Or more stupid “safety” rules than mandating that all cars need things like Electronic Stability Control which was only created after Mercedes created the top-heavy A100 which failed the Swedish Elk Test ?
A plague on all their houses.
It may be true that the US leads in advanced software and chips — but sales of those products are small, even if the profits are large. Their market is limited to government and corporations that really need the computing power, and first adopters, who will pay any price if they think it will gain them status among their peers.
The real money is in the previous generation of integrated circuits. They have been around long enough for chip yields to be high and prices affordable, and they can run the previous generation of software. That’s what powers the top-end laptop you find at Best Buy and the new corporate desktop at work — and those designs have been handed to the Chinese to manufacture.
Worse yet, the Chinese are not stupid, even though we act as if they were. They can reverse engineer the products they have been given to manufacture and anticipate the next generation, just as Japan and then Taiwan did in the ’70s and ’80s.
We can still write the most advanced software and make the most advanced hardware, but it’s only a matter of time — and not very much time — until the Chinese will pass us.
China is not dumping EVs because China is not selling EVs below cost. BYD sell at a higher price in Western markets than in China and overall BYD has a net profit margin double that of Ford for example.
The fact is BYD has a most of its development and production in house. This was the model that made Ford a rich global industrial bohemoth. Asset stripping and a focus on shareholder returns has since seen the likes of Ford outsource even basic development activities. This course of action was sustainable in a mature market like ICE cars, but technological disruption has revealed Ford and similarly hollowed out Western industry in general lack sufficient engineering research capability to catch up. A basic count of qualified engineers in China vs the world illustrates the technological deficit we now have.
The USA isn’t even advanced in electronics. The USA still can’t get its first current generation fab plants working even when built and operated by the true global leaders from Taiwan. For the most advanced fab plants you need to go to South Korea and Taiwan. The likes of Nvidia are basically Asian companies with a US listing.
IPR on advanced chips can only take you so far when they’re being manufactured in China using materials sourced from or controlled by China.
It certainly is a recipe for success if your western competitors are being fined by their own governments if they don’t sell their products as cheaply.
90% of the Chinese EV makers have gone bankrupt since 2018 and there is a worldwide falling away of EV sales growth. The early adopters have bought their cars and now the only buyers are those for whom EVs make financial and practical sense. For all the benefits of electric vehicles there are some even bigger problems: range anxiety, slow charging, lack of infrastructure, lack of grid capacity, poor range, lack of home charging for residents without off street parking, rapid depreciation, battery fires, expensive repairs and insurance. When the government incentives are removed, only true believers will be buying.
Our Nissan Leaf costs about £0.09 per mile on electric (but lower if we charge when the sun is shining); our Zaphira costs about £0.11 per mile in petrol. The Nissan has limited range, but makes sense for short local journeys.
EVs make perfect sense for some people depending on their circumstances. The Government is artificially forcing electricity prices up, so your Leaf might not always be as cheap as it is now, but if it works for you, great.
However, that’s not really the point. Governments should not be forcing consumers to buy a product that does not meet their own particular needs, increasing the cost of living in the process. In the case of EVs, this government action will crush the UK and European car industries, as they cannot possibly compete with Chinese imports whose price is effectively subsidised by the CCP. If European car makers do look like being competitive at any stage, the CCP can just limit supply of batteries and battery components, as they control 90% of the global processing capacity of the minerals essential to EV (and for that matter, wind turbine, solar panel, grid decarbonisation) production.
Forcing European car makers to go electric, and fining them if they don’t, is just handing the Chinese a complete industrial sector on a plate.
All those woke climate warriors and their woke politicians puppets thought E.V.s where a great idea they just didn’t bother asking Joe public who actually have to buy them what they thought about them .Joe public took look and thought Naaah doesn’t work for me!
Far more reliable, far longer lasting and far cheaper to run. Range anxiety will be less of an issue as more and more people adopt and others start to realise that the times when they drive 200+ miles in one go are extremely few.
Until they all go on holiday to Cornwall on a bank holiday weekend and try to charge at Gordano services only to find themselves in a queue of dozens if not hundreds of other EVs.
We rented an EV (Tesla model Y) for a road trip in Canada last summer. I didn’t sleep the night before we left as I was convinced we’d spend half the holiday conked out waiting to be picked up by a recovery vehicle at great extra cost. In the event it went swimmingly – we were able to charge the car from a normal wall socket each night and there were plenty of public charge points available otherwise. Saved a fair bit on fuel costs. The car was an absolute dream to drive and was easily big enough for a family of 4.
On more than one occasion we experienced a bit of aggression on the roads from rednecks in huge SUVs who would cut in just in front of us on the motorway and then burp a cloud of black smoke out of the exhaust pipe. I couldn’t quite figure out if they were doing this deliberately (how?) or whether it was just my imagination. My jaw dropped when I read this in the Graun a few weeks after returning:
https://www.theguardian.com/business/2023/aug/04/electric-cars-culture-wars-evs
Car manufacturing is largely the art of economic assembly of high quality components into an appealing package. The car industry lives and dies by its supply chain.
China dominates all stages of materials processing and component manufacturing – the supply chain of nearly all global manufacturing. As this industry left the West, a gullible public was told this was “low value”. There is nothing low value about being able to make consistently high quality steel in vast quantities or billions of widgets with a 6-sigma consistency. These activities are very capital intensive, need a large pool of highly numerate and literate workers, and depend on a tangled web of supporting industries that take generations to foster. In short, these supposedly low value industries need highly developed, complex industrial societies. The loss of those industries was a reflection that we were becoming less capable, less sophisticated.
These low value industries, being the first and largest tier of the industrial pyramid, are also the incubators for most of the new technicians and engineers. A tangled web then weaves industry and academia together – world class industrial research can’t be sustained without industry. So now not only has the supply chain disappeared but so too has our capacity to train technicians and engineers we need to sustain the industry and infrastructure we have left. China meanwhile turns out a million engineers and 4 million technicians every year. Sure, they’re not all great, but the pool the best of Chinese industry has to choose from is hundreds of times larger than the pool Western industries have to choose from.
We should also not underestimate the importance of local supply chains. Quality management, inventory control, building working relationships, and trust are easier when you’re in the sane city. Having multiple suppliers of the samw thing serves to organically hasten innovation and improve quality in the supply chain without the Tier 1 manufacturers have to lift a finger. The cluster effect is as real in manufacturing as it is in finance. Our financiers have declustered our industry, making our remaining industry less effective.
Chinese car maker BYD has over 30,000 patents for making its electric cars. Most of those patents are for seemingly mundane things such as a cable tie here, a handling tool there. Yet it is the mundane things in engineering that create the sublime.
And even as obviously bad as things are for the West now, I don’t think it is yet understood by many how badly we have messed up and how worse things will get. We literally do not produce the people or the bits to sustain the industrial systems that feed us, warm us, and transport us.
True that. Sadly.
Well, we can always just steal back the IP that China stole from the West without repercussions. Nothing short of a full blown economic war against China will arrest this decline, albeit with a lot of domestic casualties in the short-medium term.
So long as the EU and its legacy state UK are wedded to the ideological 20 year eco war on cheap power, China will prevail. The West has gone all seppuku – it has made power too expensive for industry to thrive. Even the German industrial giants are priced out, screwed and exiting the market. The EV car market will never attract non rich buyers whilst electricity costs so much. And given the insanity of the premature war on nukes and fossil fuels, we will not see cheap power here for another 20 years.
Some missing spots in this analysis. China dominates the market, but India is making progress and should ” catch up” if the present business friendly government stays in power.
Of course the CCP doesn’t want a rival and large sections of the Western MSM are in synch with it with the ” gloom and doom” stories lately emanating on Indian business despite it being the fastest growing economy.
It’s also a myth however that fossil fuels can be banished by 2030, but that’s another story altogether.
For me it`s a curious case of western hyprocricy again. For decades demanding of developing countries that they open their markets, doing away with barriers to trade. Countries that are at an inferior place when it comes to the development level.
And as soon as the tide turns and oneself gets in a weaker position the drawbridges are immediately pulled up. A behaviour that would have caused scolding in the reverse position.
Totally but then part of the bargain was supposed to be that they liberalise and adopt the US way of politics in their newfound prosperity. Unfortunately they only took the plutocracy and corruption parts and not the solid institutions, liberty and democracy parts.
Free trade always creates winners and losers. It just took a couple of decades for the losers to look up from their super cheap Chinese televisions and phones to see that they had acquired loads of goods but lost so much wealth.
The Left were saying this at the time of trade liberalisation but they were dismissed as communists etc. now all those people who were calling protectionists communists have themselves turned protectionist and the “Left” are stuck holding the neoliberal bag.
The Chinese can play the hypocrisy game as well as we can.
How much is Chairman Xi paying this author. Seriously, when people say China ‘floods the market’, it means basically that the Chinese are using government subsidies to substantially offset the costs and produce an ARTIFICIAL cost advantage vs. other nations’ manufacturers. Many nations do this to protect/nurture certain industries, but China takes it a step further. The idea is to drive down costs and keep them down to drive competitors out of business then use the established monopoly to capture profits for China and also extract political favors by threatening to withhold critical goods. The Chinese have ALREADY DONE THIS for multiple goods, having successfully mostly monopolized the production of so called ‘rare earth’ elements necessary for, among other things, EVs. They’ve been doing this for decades now and getting away with it. Attempts to ‘raise the drawbridge’ on trade, are simply a recognition of reality, that we’ve been getting robbed repeatedly and it’s time to bar the doors. Economic efficiency cannot ever be truly separated from considerations of politics like national interests, jobs, and yes, military defense. Simply saying that we should let the Chinese do whatever they want because its economically efficient is either willful ignorance or suicidal levels of naivete.
Also, did it never occur to this author that maybe the Chinese government is doing other totalitarian things to ‘encourage’ (read coerce) their people into buying Chinese made electric vehicles? Did it never occur to this author that maybe the consumer preference in the US and European market is very different from that of China and that maybe demand, not supply, is the issue here? In America at least, car dealerships aren’t complaining to manufacturers that there aren’t enough EVs, they’re complaining that there are too many, and they’re too expensive, and they can’t sell the ones they have. This article is is just so much globalist trash and needs to be called out for such. I rarely go this far in my criticisms, but this is propaganda I’d suspect might have come from a Chinese AI. Shame on Unherd for publishing what could easily pass for an article in the global times.
It’s a fairly weightless article,and the author’s conclusions are accordingly superficial, but I suspect this chap’s naivete is more a deference to appearing conservative than servitude to the CCP.
Dyson had a serious look at manufacturing electric cars some years ago. After years of research, James Dyson said EVs were not commercially viable:
“Electric cars are very expensive to make. The battery, battery management, electronics and cooling are much more expensive than an internal combustion engine.”
To break even, the Dyson car would have had to sell for $184,000 (£150,000) which far exceeds the cost of most electric cars which are either cross-subsidised from the sale of ICE cars by the big motor companies or in China’s case by the government.
I suspect Trump will make EV tariffs the centre-piece of his presidency. He already has a funny schtick about the most enjoyable time driving an EV are the first five miles. After that you start worrying about how much charge you have. He is instinctively in favour of ICE cars and won’t worry about locking the Chinese out of the US market because the Chinese don’t buy American cars anyway.
I reckon Trump will kill the EV market in the US, the market in China will implode and the Europeans will limp on producing unloved and unsold electric versions of BMWs, Mercs, Jaguars etc to meet the mythical “net zero” target.
Tesla?
Tesla has problems of its own.
Germany: Tesla plant protesters to spend week in forest – DW – 03/01/2024
The only American car bought in China. If the US freezes out Chinese vehicles then it’s goodbye to Tesla Chinese market. China will have already appropriated any IP it needs so it doesn’t need Tesla any more.
At least Dyson cars would have kept the roads clean
The EV market is fictitious to begin with. It’s driven by govt regulation. There is no natural demand for EVs.
Yes – don’t manufacturers get fined if they don’t sell a certain % of EVs within their total cars sold? Completely crazy!
Tesla gets more than $1 bill annually from emissions credits – from car manufacturers buying offsets because they failed to meet govt mandated regulations. In fact, Tesla did not turn a profit until 2021 on the actual manufacture of cars.
Here’s a thought. Stop forcing manufacturers to build EVs because of govt regulation. Let the Chinese dominate a market for a product that the majority of people don’t want.
Whether or not China is winning the EV price war (they are) or the quality battle (maybe or not) is secondary to the fact that China has majority control of the supply of exotic ingredients needed to build the damn things in the first place.
Aside from that there are the practical considerations such as reliability, safety and the necessary electrical supply. Articles are posted every day pointing out these problems. “What about limited range in big cold countries like Canada?”. “Where are the charging stations?” “Where are the grid enhancements to support charging stations?”.
With the glacial pace of domestic resource development, hampered in large part by Net Zero ideology, the West couldn’t possibly produce EV’s in the numbers to replace ICE vehicles. Canada just made $30B in subsidy commitments for two EV operations yet the details are sketchy with no guarantee they’ll ever produce anything. None of it seems to make any sense whatsoever unless you’ve paid attention to the progressive theories of DeGrowth, Circular Economy and 15 Minute City. You may ask “Why is the government mandating the purchase of a vehicle that won’t meet my needs even if I could afford it?”. The answer is you aren’t supposed to have a vehicle.
A large number of people, the majority, buy vehicles based on price rather than the state of the tech. So long as the range of Chinese electric vehicles is not very different to locally produced vehicles (which it isn’t) price will dictate what gets bought and whilst Chinese is cheaper then it will be Chinese.
People bought buy more Ford Fiestas than they did Ferraris even though Ferraris are much better cars – but Fiestas cost a lot less!
Have you seen the footage of the EV graveyards in China?
China’s EV sales figures are dubious and dodgy.
Beware of the hype, the propaganda and the misinformation.
There’s an unreal quality about a lot of the debate around EVs. One big problem is the lack of a second hand car market as nobody wants to buy other people’s clapped out batteries.