Chinese Electric Vehicles and Their Implications in the U.S. Car Market
The oil crises in 1973 and 1979 would forever change the American car market as consumers faced strict supplies of gasoline, higher inflation, and inefficient American-designed and made automobiles. Americans wanted affordable and efficient cars, allowing Japanese automakers with competitive prices and qualities to break into the U.S. market with a combined 35.4% of the car market share in the United States in 2023 (Carlier, 2024). The U.S. government, pressured by domestic calls to protect American jobs and corporate interests, moved to salvage the situation. It is commonly said that history repeats itself, and the rise of Chinese electric vehicles (EVs) and their potential impact on the U.S. car market rings a bell. The massive quantities of affordable yet high-quality and efficient Chinese EVs could destroy American competition and accelerate the United States to its climate goals; however, protectionist policies and national security concerns have already stopped Chinese EVs from driving on American soil (Kennedy, 2020).
Today, a similar situation presents itself. The urgency of environmental protection and development in EVs has spurred demand for EVs in the U.S. market. However, many EV brands and cars after being on the market for many years, like Tesla Motors Inc., may actually be more costly than an internal combustion engine vehicle for the average American family (Anderson & D’Souza, 2021). As interest in EVs grew in the United States, Chinese companies and the Chinese government saw a massive opportunity in EVs. Take BYD for example; it started in the early 2000s as a small firm focused on battery manufacturing and hybrid vehicles. With substantial subsidies from the Chinese government and innovation on its own, BYD grew to become the largest battery-powered electric producer in the world. Its success brought in $28.2 billion in revenue from July to September this year, outpacing Tesla’s revenue for the first time. BYD’s incredibly efficient batteries, vertically integrated supply chain, and affordability grew it into the giant it is today. BYD is not just one success though. Numerous competitive Chinese EV brands are popping up, and China is now the largest exporter of EVs at 1.6 million cars in 2023 (Silva, 2024). As every day passes, Chinese EVs pose a larger and larger threat to foreign automakers, and their presence can be felt in almost every continent.
Now, BYD and other Chinese EV brands are present in Asia, Europe, and South America but are notably absent in the United States. There are three notable reasons. The first reason is geopolitical. U.S.-China tensions have been consistently rising, as the Chinese economy threatens U.S. hegemony. As a preemptive deterrent to BYD expansion and increased competition for American firms, the United States has already placed 100% tariffs on Chinese EVs (Boudette, 2024). The memories of the 1970s and 1980s loss in market share of American cars to Japanese competitors are still fresh in the minds of American automobile executives and autoworkers. American corporate executives and autoworkers alongside more “nationalistic”-minded politicians will continue to push for protectionist policy. If there is a flood of affordable Chinese EVs on the market, corporate profits and U.S. jobs are at stake. Besides the traditional American car companies, American EV brands like Tesla are also concerned about a flood of affordable and well-built EVs that would outcompete them. More recent start-up brands like Rivian, which is still on shaky grounds with being profitable with a net loss of $1.1 billion (Wong, 2024), would then find it even harder to compete in a market with Chinese EVs. Other critiques may include national security concerns if American automobile manufacturing withers away. Furthermore, there is concern that the technology in Chinese EVs could be used to spy on American citizens, providing a convenient reason to block them from entering the market.
The obstacles in entering the U.S. market do not stop there either. From BYD’s point of view, it currently makes no sense to export to a hostile country with customers who may be reluctant to drive a Chinese vehicle. With almost all Americans having never seen a Chinese EV with their own eyes, there is very little positive perception around them. Americans may see American cars as a form of patriotism, Japanese cars as reliable, and German cars as luxurious; however, Chinese cars in the American view have yet to earn any positive attributes and will not if no American can buy them in the first place. In addition, consumer tastes in the United States and around the world are very different. The rest of the world’s preference for smaller cars and their lower or nonexistent tariffs allow BYD to maintain a competitive edge in the market with its affordability. With the absence of Chinese EVs, there are many impacts on American drivers.
The average American consumer, is still stuck with few options for affordable EVs if Chinese EVs are unavailable. For an EV to be affordable, it needs to be affordable to the working and middle classes, but American EV brands are, for the most part, not at that stage yet. The big three automakers (Ford, General Motors, and Stellantis) are struggling with their production lines and getting their EVs to a competitive price point. Tesla has reduced its shortages but still suffers from a lack of demand even with lower prices (AP News, 2024). European EVs have been slow to enter the American market (Campbell, 2024). The trend currently points to the protection of American jobs and corporate interests at the cost of a faster transition to cleaner roads. Furthermore, it echoes realpolitik in which America chooses to protect its industry at the costr of free trade. Whether or not the aggressive stance on Chinese EVs is right for the consumer, the worker, the principles of free market competition, and the environment is up for debate, but it is certain the average American will not see a Chinese car on U.S. roads anytime soon.
Edited by Nora Ni
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