They Didn’t Believe Us When We Said Unaffordable EVs Were A Problem
I came across an interesting post the other day on social media that (mostly) checks out. As Chinese EVs get cheaper and cheaper, U.S. manufacturers are starting to freak out.
BYD in China just dropped this ad saying "Electric Cheaper Than Gasoline".
— Gavin Shoebridge (@KiwiEV) February 20, 2024
This BYD car starts at $11,100 USD and they say it's sending ICE makers "into a panic".
This is happening in China TODAY and in global markets this year. Are Legacy car makers are ready for this? pic.twitter.com/XWD7jAZ8oP
My colleague Steve already covered this pretty well, but I’ll give a quick summary of what’s going on.
In short, tariffs and other measures have kept cheaper Chinese EVs from competing with domestic, European, and Japanese automakers in the U.S. market. But, there’s a way around them: building the cars in Mexico. Tariffs have been either low or zero for a long time under agreements like NAFTA and the USMCA that replaced it. If Chinese automakers can build cars in Mexico instead of in China, they can undercut everybody. At best, this means reduced shifts and plant closures. At worst, the sudden influx of cheaper competition means that automakers’ EV plans just won’t work, and the whole company goes the way of the Dodo.
It’s not as bad of a problem as it appears on the surface, though. For example, an $11,000 or $14,000 car is both undesirable to U.S. buyers and might not actually meet U.S. safety standards. But, even a $20,000 or $25,000 EV still beats just about everybody. GM had the Bolt and Bolt EUV, but production has discontinued and won’t restart under generation 1.5 designs for at least a year or two.
Worse, it won’t be just BYD hitting North America below the belt. Other companies like Nio and Xpeng will be coming along eventually, too. So, this is a problem that U.S. automakers and other selling in the market will have to address if they want to survive.
If Only Somebody Had Warned The Industry…
Sadly, this is a drum we’ve been beating at CleanTechnica for a while. Here’s just one example of that. For years, I’ve been warning that this day was coming and that automakers really needed to offer something affordable if they wanted to survive long-term. But I was met with people who told me, “It’s OK, the average price of cars is higher now.”
But, now that the competition is showing up, it’s suddenly not fine, and the strategy of selling expensive EVs forever and never going down the market isn’t flying like they’d hoped. Automakers are getting hit by a double whammy of cooling growth in demand (not the be confused with cooling demand) and the specter of cheap competition.
What’s even sadder is that the U.S. auto industry has been here before. In the 1970s, quality was down. Fuel efficiency was atrocious. Japanese automakers had better engine technology that delivered both quality and efficiency. Now, the “Big 3” are behind their global competition, and falling behind more with time, and only survived because they managed to get quality under control in the 80s and 90s.
The right time for automakers to fix this problem was years ago, but they wouldn’t listen. Everything was fine because people were willing to sign up for $1000+ car payments that stretched out to 84, 96, and even 120 months in some rare cases. It didn’t take a genius to see that that was unsustainable, but the supply of midwits seemed to even be low.
The big question now isn’t whether the Chinese EVs are coming. They’re coming no matter what. The real question is whether the domestic automakers can change course and get some cheaper platforms into play before too much of their lunch money gets taken.
Either way, if you want to be a big player in the EV industry, you’d better download Duolingo and brush up on your 中文.
Featured image by American Association of Manufacturers
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