Washington is holding up a future of inexpensive EVs
Back in the early 1980s, when the US government forced Japan to limit car exports to the United States, the goal was to protect Detroit. American car companies said the restraints would give them time to cut costs and improve their vehicles’ quality and fuel economy. If the Japanese wanted to sell more vehicles than the limits allowed, they would have to build factories here. Those factories, the Detroit automakers assumed, would ultimately be organized by the United Auto Workers union, whose contracts stipulated hundreds of pages of work rules.
We all know how that turned out. Japanese companies, as well as Korean and German automakers, built a flock of nonunion plants, mainly in the South. Thousands of people applied for jobs, the factories fueled local economies, and the protectionist solution backfired. Unable to stave off the onslaught, Detroit lost market share and closed factories.
“It was more of a political tactic than anything else,” says Jeffrey Garten, dean emeritus of the Yale School of Management and undersecretary of commerce for international trade during the Clinton administration.
Now, in a repeat of the politics that enveloped the 1980s, the Biden administration is fighting the Chinese automakers that make inexpensive electric vehicles.
There are no Chinese-built cars available in the United States yet, even though Chinese companies have been displaying vehicles at American auto shows for years. The main reason is a 27.5 percent tariff on imports of Chinese-built cars, levied by the Trump administration and still in force. Last month, President Biden announced an investigation into whether Chinese vehicles are security threats.
Many pundits say that was done to pick up crucial votes in my home state of Michigan, but it isn’t clear whether American consumers really believe that goods from China pose such perils. Similar allegations are being levied against TikTok in Congress, and yet Americans have helped make it a social media behemoth.
As I’ve said before, I doubt Detroit’s heart is truly in the transition to electric vehicles: The companies are already backing away from their bold proclamations of an EV future. So why not give consumers more choices, in the form of Chinese electric vehicles?
The United Auto Workers would instantly cry “No!”
The union has put on a full-court press to organize the workers at the international carmakers and Tesla. Union president Shawn Fain regularly rails against “all the Chinese companies that want to enter our market.”
But while Detroit is still talking about a transition from gasoline engines to EVs, Chinese manufacturers are far ahead of American companies in bringing a wide range of EVs to the market. Since 2010, some 300 companies have rolled out EVs of all shapes and sizes, from minicars to full-on luxury vehicles.
While competition has winnowed their ranks to about 100 brands, “there’s a lot of very intriguing, quite frankly fascinating, new technology, features, and design that we’ve never seen before here in the United States,” says Robby DeGraff, product and consumer insights analyst at AutoPacific. “Some of it is really, really cool.”
For instance, the BYD Han, a midsized family car, can accelerate from zero to 60 mph in a zippy 3.9 seconds. Wuling has sold more than 1 million of its Hongguang Mini EV, which goes for just $4,730 with a battery. You also can buy one without a battery and get a subscription that lets you swap in your choice of charge, depending on how you will use it.
BYD, or Build Your Dream, is the clear Chinese EV leader, challenging Tesla for global leadership, even accumulating its own fleet of ships to send its EVs around the world. BYD wants to build a plant in Mexico, officially to supply Latin American countries, a move many experts suspect is the first step toward selling in the United States, although BYD denies it.
A big fear is that the Chinese carmakers, facing sales pressure at home, will dump their cheaper EVs in the US market, where the overall average EV costs about $55,000, or around 17 percent more than the average gasolinepowered car.
Price “remains one of the top reasons” that consumers are rejecting EVs, DeGraff says, along with worries about range and refueling.
But cheaper sticker prices alone won’t be enough to recruit customers. Just as imports have done in the past, BYD, or any other Chinese company, would have to prove to Americans that it is trustworthy enough to earn their business. That might be a long-range prospect.
Toyota, which now ranks second in US market share behind General Motors, needed a half century to climb to that spot. It introduced its first imports to America in 1957, only to pause when it learned its cars did not have enough power to accelerate on American highways. It returned for good in 1959 but took until 2003 to pass Chrysler and Ford.
Given the lesson from the Japanese automakers, the United States can allow Chinese entrants but keep close watch on them.
If there are true concerns about security, the government can monitor what goes under the hood of these cars. You might not be able to block the transmission of all data back to China — after all, every company, domestic and foreign, tracks buyers’ information — but there could be penalties if customers’ data is used for spying.
For years, American companies simply didn’t care about EV development, while Chinese companies did. Detroit should not be rewarded for its lack of vision, nor should consumers be penalized for it.