President Joe Biden has been urged to ban imports of Chinese-made electric cars to the US.
The chair of the Senate Banking Committee, Senator Sherrod Brown, wrote “Chinese electric vehicles are an existential threat to the American auto industry”.
His comments are the strongest yet by any US lawmaker on the issue, while others have called for steep tariffs to keep Chinese electric vehicles (EV) out of the country.
In February, the White House said the US was opening an investigation into whether Chinese cars pose a national security risk. At the time, President Biden said that China’s policies “could flood our market with its vehicles, posing risks to our national security” and that he would “not let that happen on my watch.”
He’s right. The idea of a sub $15k sedan is a threat to the US auto market. Make it an EV to boot and America just can’t compete in the free market.
It’s a shame that the common person has to get shafted to protect the auto industry and while I have zero sympathy to the c-level management and shareholders, the auto industry does employ many working class folks who could be very much harmed by cheap imported cars.
The major problem here is that China is offering prices below production costs aiming to ruin foreign competition. Once the objective of a monopoly-like market is reached, they can increase the price.
China’s domestic market has already seen a heavy price war leaving many EV companies in financial troubles (and, consequently, leaving buyers often without the possibilty of software maintenance and other after-sales services).
Baidu’s brand WM Motor, for example, ran out of liquidity last year, as well as Tencent’s Aiways. Other brands like Levdeo or Singulato filed for bankruptcy if I remember that right.
[Edit typo.]
The major problem here is that the US is owned by the oil industry and they will never allow competitive EVs to be built here. The US could easily match what China’s doing, but those subsidies go to oil instead.
The U.S. as well as Europe should definitely shift subsidies away from fossil fuels to renewables, and their industries could technologically keep up with China’s. However, it wouldn’t solve the problem here imo, as China has a structural overcapacity across the whole supply chain.
In a nutshell, China will do everything to flood the market with ever cheaper products. Its state policy has always been incentivizing lower prices for larger market share, but this policy has reached unprecedented levels (and not just in EV car market, btw.).
A major reason for this is Beijing’s bias against a ‘social welfare’ state for the benefit of industry subsidies. During the pandemic, the government provided high company subsidies to keep people employed, but no household support (which left and is still leaving domestic consumption low). The federal and local governments provided their subsidies irrespective of firms’ profitability. Knowing that the Chinese state-planned system traditionally rewards the mentioned scale of business over financial health, firms increased their production capacities even more, hoping to compensate lower margins with volume.
The result is now a massive and increasing overcapacity that can’t be absorbed by the domestic market.
Sorry for the long post.
The US could easily match what China’s doing
Not with the unions in the US they can’t. Part of the reason China is able to produce cheap cars is because they have cheap labor.
Including widespread use of slave labor. It doesn’t get any cheaper.
Are you referring to prison labor?
I’m referring to Chinese slave labor, which is not even remotely comparable to American prison labor.
The US has roughly 0.3% of it’s population as slave labor. China has 0.4%. That looks pretty comparable to me
Thanks for the extra info!
The major problem here is that China is offering prices below production costs aiming to ruin foreign competition.
Do we have any real evidence of that?
One more recent investigation by Rhomberg Group refers to China’s overcapacity and calling it ‘structural’, saying that
One last difference [between Chinese subsidies compared to U.S. and European subsidies] is how much support central and local governments have given failing enterprises with little consideration of profit and efficiency. In addition to generous credit and tax support measures, struggling companies were granted credit forbearances during COVID to help them face liquidity crunches and operational disruptions [while private household received nothing, leaving domestic consumption low]. Government support and prevention of market exit boosted the number of loss-making companies […]. In a crowded environment, with loose budget constraints, firms lowered prices and accepted razor-thin margins to retain market share. Perversely, it also pushed them to build additional capacity in hopes of offsetting lower margins with higher volumes, and because they knew from prior episodes that if authorities ultimately forced a market consolidation, survival would be determined based on scale, not financial health.
[…]
Chinese firms are still using overseas markets to make up for lower prices, margins, or even losses on the China market. But this China-world price discrepancy also means that Chinese firms could lower their export prices further in the future to gain market access, weed out competitors, or make up for new tariff barriers in the EU or the US.
Another new study by German researchers in Kiel on Chinese subsidies has been posted by someone here just today on Lemmy.
According to DiPippo et al. (2022) and recent OECD studies, the industrial subsidies in China are at least three to four times or even up to nine times higher than in the major EU and OECD countries. According to a very conservative estimate, industrial subsidies in China amounted to around EUR 221 billion or 1.73% of Chinese GDP in 2019. According to recent data of 2022, direct government subsidies for some of the dominant Chinese manufacturers of green technology products had also increased significantly - the electric car manufacturer BYD alone received EUR 2.1 billion [in 2022, which is up from just EUR 220 million in 2020].
We have been observing a massive price war within China’s domestic EV market for some time. Many EV car producer have already filed for bankruptcy or are on tbe bring of collapse. Consequently, many Chinese customers are unable to access after-sales and software maintenance services.
If only we had some sort of social safety net…
This “trusting the free market” and squashing any competition points out how awful our system is.
Maybe the displaced workers can be hired by the government to fix our crumbling infrastructure.
Problem here is the competition is literal slave labor throughout the entire process to make it cheap
How many times do we need to bail this industry out? Detroit’s problems are entirely the fault of its own short-sighted greed. They’ve deliberately chosen not to produce affordable sedans, instead focusing only on super expensive giant luxury vehicles. This has even happened before. The exact same thing happened back in the 80s with the Japanese car companies. Toyota and Honda ate Detroit’s lunch because Detroit had become complacent and greedy.
To be fair, the EV market is already somewhat reliant on slave labor in Xinjiang, but Chinese companies especially-so for obvious reasons. Buying cars from Chinese companies means there’s basically no ability to pressure them out of using Xinjiang-sourced lithium.
The Uyghur Forced Labor Prevention Act in the US actually bans import of products by companies in Xinjiang that can’t prove they don’t use forced labor in their supply chains, so this isn’t a hypothetical harm reduction, either.