US car manufacturers have had an oligopoly of 3 manufacturers that haven't had serious domestic competition since the 1920s. They failed to successfully respond to the Japanese since the 1970s, other than make big SUVs and trucks, and with their allergy to innovation they will not likely have a successful response to Chinese competition. The US government will probably need to provide subsidies to new domestic manufacturers to have a chance in preserving domestic car production or allow the Chinese to own factories in the US.
Michael - excellent analysis, as always. I would add that the average Chinese consumer/laborer earns anywhere between 25% to 30% less than their Western counterparts. The Chinese standard of living is no longer impoverished, but it also calls for compromises that would make many Westerners uncomfortable. The Chinese economy, industrial output and pricing structures for durable goods are geared to that reality. So BYD’s Seal EV priced at $11,000 USD domestically is absurdly low by Western standards. But to the average Chinese, it is a not an inconsiderable sum to pay, even though the Seal EV is priced at the lower end of the spectrum.
The western world generally came up with the tech; solar panels, the lithium ion battery, etc.
Western businesses couldn't or didn't want to lose money whilst making them profitable, China was happy to wear the losses until they were better and accepted, they now dominate. Yes they use subsidies etc but they also have a huge local market which helps.
I recall non tarrif barriers, like safety standards, when Japan was rising. Is China submitting vehicles for independent crash testing and publishing the data before shipping cars? Maybe someone else is testing?
And as of today we have news reports of remotely detonated pagers and walkie talkies in Lebanon. Discussions have already been circulating about parallel if not similar threats that may one day involve electronic devices, especially those with large lithium ion batteries.
Great questions. China has bigger scale, quicker speed, lower costs, and much richer subsides than any other country in the world. On costs, China is 25-30% cheaper when it comes to manufacturing cars. It's a giant problem for the West.
US car manufacturers have had an oligopoly of 3 manufacturers that haven't had serious domestic competition since the 1920s. They failed to successfully respond to the Japanese since the 1970s, other than make big SUVs and trucks, and with their allergy to innovation they will not likely have a successful response to Chinese competition. The US government will probably need to provide subsidies to new domestic manufacturers to have a chance in preserving domestic car production or allow the Chinese to own factories in the US.
Michael - excellent analysis, as always. I would add that the average Chinese consumer/laborer earns anywhere between 25% to 30% less than their Western counterparts. The Chinese standard of living is no longer impoverished, but it also calls for compromises that would make many Westerners uncomfortable. The Chinese economy, industrial output and pricing structures for durable goods are geared to that reality. So BYD’s Seal EV priced at $11,000 USD domestically is absurdly low by Western standards. But to the average Chinese, it is a not an inconsiderable sum to pay, even though the Seal EV is priced at the lower end of the spectrum.
I look forward to your next post.
Conrad - Very good points, all of them. Thank you for helping to paint a more complete picture. MD
No wonder Donald Trump keep harping on and on about China...
The western world generally came up with the tech; solar panels, the lithium ion battery, etc.
Western businesses couldn't or didn't want to lose money whilst making them profitable, China was happy to wear the losses until they were better and accepted, they now dominate. Yes they use subsidies etc but they also have a huge local market which helps.
I recall non tarrif barriers, like safety standards, when Japan was rising. Is China submitting vehicles for independent crash testing and publishing the data before shipping cars? Maybe someone else is testing?
And as of today we have news reports of remotely detonated pagers and walkie talkies in Lebanon. Discussions have already been circulating about parallel if not similar threats that may one day involve electronic devices, especially those with large lithium ion batteries.
How does one spell non tariff barriers again?
How do these companies achieve these prices?
Automation?
Slave labour?
Government subsidization?
The North American response to date is to double the sales price of Chinese manufactured vehicles imported into Canada and the US.
But that still leaves the prices lower than those manufactured in Canada, United States and Mexico.
Why are these prices so high?
Profit?
High wages/lack of automation?
Lower government subsidies?
Great questions. China has bigger scale, quicker speed, lower costs, and much richer subsides than any other country in the world. On costs, China is 25-30% cheaper when it comes to manufacturing cars. It's a giant problem for the West.
Where do the proposed gigantic tariffs on Chinese cars (in Canada and the US) fit into this?
Basically, they are designed to buy time. Things have shifted so quickly that the existing automakers are scrambling to come up with a response.