Maarten Ectors’ Post

BYD, the world’s biggest electric car maker, is eying Mexico as base to sell to the American market, reports the The Wall Street Journal. The Shenzhen-based auto company is scouting factory locations in the country which would allow it to export to the U.S. without paying high tariffs, say people familiar with the matter. BYD doesn’t have any “imminent announcements to make regarding new markets,” a company spokesperson said. Chinese auto companies are “very powerful” and a serious competitive threat, similar to the Japanese automakers who entered the U.S. in the 1970s and South Korean firms in the 1990s, said Carlos Tavares, chief executive of Chrysler parent company Stellantis. “You can see it in the European markets,” Tavares said in a conference call. “We may not want to see—a third time—the same movie.” “If there are not trade barriers established, [the Chinese companies] will pretty much demolish most other car companies in the world,” Tesla chief executive Elon Musk said in a January earnings call, calling them now the “most competitive” in the world. The European Union has launched an investigation of Chinese EV makers to determine if they are receiving unfair subsidies and the Biden administration is considering upping tariffs on Chinese EVs. Read more about China's push into EVs and other industries, as well as the latest news about the Chinese economy in Trade War, published every Sunday. Link to check it out below:

After all the #tariff hyperbole here's the real question: what model for #Chinese #EV and #battery investment in Europe? Remember, tariffs don't stop Chinese investment or manufacturing in the EU. They discourage carmakers (including western ones like Tesla, BMW and Renault) from producing in China for the #EU. Are we happy to call Chinese enclaves "made in Europe"? Even if they produce with imported labour and no local supply chain, like they do in #Hungary? Do we think states should be allowed to (EU) subsidise this type of investment? Or do we want to promote #jointventures (JVs) with genuine collaboration, knowledge and benefit sharing? I think the latter model is the way forward. The aborted #Ford #CATL deal in the US offered an interesting model. But it is not just a question of desire but also one of policy choices. In China JVs were long mandatory in the automotive sector. The US has clear (but perhaps overly? strict) "Entity of Concern" rules in the IRA. This is the next big industrial policy question on the EU's agenda. https://lnkd.in/eMXBcZYb

Great weekend read from the Economist with some provoking thoughts on the influx of Chinese (EVs) on western markets. Here some outtakes: China has taken over Japan as the largest exporter market of cars. EVs play a major role in this success. Making EVs is less labour-intensive so there is a danger of confusing disruption caused by the shift to EVs with that caused by Chinese production of them. The successes of Chinese cars should be celebrated, not feared. I tend to agree with most of the article: China is playing a major contribution to the global transition to e-mobility which we have to applaud. MG and BYD for example already significantly contribute to the European EV stock and pushing manufacturers to go all in (and lower their margins which is good for consumers). The Dutch economy didnt collapse after car manufacturing was outcompeted in the 70s (by other Europeans). Also dont think there is any unemployment issue anytime soon in many western countries. Let alone the impact on CO2, the (Chinese) EVs immediately benefit local noise and emissions pollution. Since we dont produce any oil and have plenty of (renewable) electricity installed I would say trading in oil dependency for car/battery manufacturing dependency is reasonable. What is a shame is that we at Jedlix - Smart Charging so far do not yet have a branded smart charging solution for a China based OEM (in Europe). Ambition for 2024 :)

Article from the Economist on China's success in automobile manufacturing, particularly of EVs: https://lnkd.in/eU9v6qxC (Paywalled) >>>> Just five years ago China shipped only a quarter as many cars as Japan, then the world’s biggest exporter. This week the Chinese industry claimed to have exported over 5m cars in 2023, exceeding the Japanese total. China’s biggest carmaker, BYD, sold 0.5m electric vehicles (EVs) in the fourth quarter, leaving Tesla in the dust. Chinese evs are so snazzy, whizzy and—most important—cheap that the constraint on their export today is the scarcity of vessels for shipping them. As the world decarbonises, demand will rise further. By 2030 China could double its share of the global market, to a third, ending the dominance of the West’s national champions, especially in Europe. ... The temptation will therefore be for rich-world policymakers to shield their carmakers from the onslaught of state-backed competition. In October the European Commission opened an investigation into Chinese cars. President Joe Biden is said to be considering increasing tariffs on them, even though America’s carmakers, protected by a 27.5% levy and handouts from the Inflation Reduction Act, currently face little Chinese competition. Yet locking out Chinese cars would be a mistake. The potential gains to the West from a ready supply of cheap, green vehicles are simply enormous—and dwarf the cost of disruption and the dangers it brings. >>>>

Seems like if #EU doesn’t raise some #tradebarriers then European auto industry will soon struggle affecting France , Germany , Italy and Czechia-Slovakia the most from a macroeconomic perspective .

CHINA Part 2 - US/EU - TRADE WAR IMPACT ON E-MOBILITY Various European & American institutions have been documenting the new China threat to their automotive industries and national economies. Their main complaint has been that Chinese EVs are growing globally because of huge state subsidies. While this is largely true, it is also very simplistic. If capital was the only factor for success, the debt ridden legacy OEMs that have received many state bailouts over the years would have growing not decreasing market share. Apple with no shortage of dollars closed its electric self driving car project after spending over $4 billion without commercial success. Like Elon Musk said, 'Prototypes are easy, production is hell'. Clearly, money only is not the key. The Chinese are starting to commoditize vehicle production just like they have done with so many electronics and equipment. China is estimated to have a production capacity of over 40 million vehicles yet their local market is at 25 million vehicles, anyone wants to guess where this excess capacity is ending up at? In 2023 China overtook Japan and Germany as the largest vehicle exporter globally. Legacy brand power is being challenged by speedy affordable innovation. To stem the rising tide of Chinese EVs, the US has quadrapled tarrifs on them to make them unattractive to buyers. This is largely a political move in a US election year, with Trump even threatening a total ban on Chinese EVs if he wins. Let us analyze how this could well be the death spell not for the Chinese but for American firms. With such rapid innovation and over production at home, Chinese EVs are shifting focus to foreign markets like East Asia, Australia, India, Russia, South America & Africa where they sell at a premium compared to their highly competitive local market. The European & American OEMs being protected by their goverments will find it difficult to breath outside their own markets, mind you many of them relied heavily on the China markets which is fast collapsing on them. The likes of GM, VW & Mercedes used to get over 35% of their vehicle sales and about 40% of their profit in China. Now they have been losing market share annually in double figures because they dont have EVs that can match the quality and price that the Chinese brands are putting in the market. Will US tarrifs aid or cripple the US auto manufacturers? Will the EU follow suit? How will China respond now that it has promised a firm response?

“The big point is that China is not just exporting too much stuff; it’s also exporting its economic problems. Xi intends to maintain Chinese jobs and factories at the expense of other countries’ workers and companies, to avoid necessary but potentially disruptive reform at home. That means Xi is actually undermining the great hope of China’s rise. A wealthier China was supposed to be an engine of global prosperity. Xi’s version is promoting protectionism and confrontation that threaten that prosperity.” I like this take on China’s global economic strategy. China can build products with quality. Typically no one born after 1980 will refute that fact. Do you think quality electric passenger cars and trucks start crossing US borders in 2025?

Tesla founder Elon Musk told tech investors in Paris on Thursday he opposed U.S. #tariffs on Chinese #electricvehicles (#EVs), an about-face from his January warning that trade barriers were needed or China would “demolish most other car companies in the world.” Read the story and more on the #energytransition from Kathari.News #ChinaUSTrade #TechInvestors #Paris #TradeBarriers #VivaTechnology

Europe gives China a taste of its own trade medicine Europe is using the threat of tariffs to press Chinese electric car makers to set up in the EU and share know-how. The big idea is to use the tariff threat to force Chinese carmakers to come to Europe to form joint ventures and share technology. BRUSSELS — The EU is having a radical rethink of how to cope with the trade threat from Beijing — and its response has a very Chinese flavor to it. Over the past years, EU trade policy has traditionally focused on building protective fortress walls, and last week's decision to impose punitive tariffs on Chinese electric cars initially looked like another example of the classic defensive playbook in Brussels. In a remarkable turn of events, however, the EU is now considering a next step that invites China's electric vehicle (EV) makers inside the walls. Advertisement The big idea is to use the tariff threat to force Chinese carmakers to come to Europe to form joint ventures and share technology with their EU counterparts, according to conversations with four diplomats and two senior officials. There are signs the formula is already attractive with EU carmakers. Franco-American-Italian carmaker Stellantis has formed a joint venture with China's Leapmotor to start Europe operations in September. Spain's EBRO-EV has teamed up with Chery — China’s fifth-largest automotive company — to develop EVs in Barcelona. https://lnkd.in/d7NvBK6j

The key to understanding this seeming contradiction is something known as “the China shock.” American policy makers long considered free trade to be close to an unalloyed good. But, according to a hugely influential 2016 paper, the loosening of trade restrictions with China at the turn of the 21st century was a disaster for the American manufacturing workforce. Consumers got cheap toys and clothes, but more than 2 million workers lost their jobs, and factory towns across the country fell into ruin. Later research found that, in 2016, Donald Trump overperformed in counties that had been hit hardest by the China shock, helping him win key swing states such as Michigan, Wisconsin, and Pennsylvania. Upon taking office, the Biden administration committed itself to making sure nothing like this would happen again. It kept in place many of Donald Trump’s tariffs on China and even introduced new trade restrictions of its own. Meanwhile, it pushed legislation through Congress that invested trillions of dollars to boost domestic manufacturing. For Biden, the transition to green energy represented a chance to bring good jobs back to the places that had been hurt the most by free trade. Then China became an EV powerhouse overnight and made everything much more complicated. As recently as 2020, China produced very few electric vehicles and exported hardly any of them. Last year, more than 8 million EVs were sold in China, compared with 1.4 million in the U.S. The Chinese market has been driven mostly by a single brand, BYD, which recently surpassed Tesla to become the world’s largest producer of electric vehicles. BYD cars are well built, full of high-tech features, and dirt cheap. The least expensive EV available in America retails for about $30,000. BYD’s base model goes for less than $10,000 in China and, without tariffs, would probably sell for about $20,000 in the U.S., according to industry experts. https://lnkd.in/gWm8hZVV