China has become a powerhouse in electric vehicles. Its automaker BYD recently topped Tesla in global EV sales, with Elon Musk warning of Chinese carmakers, “If there are no trade barriers established, they will pretty much demolish most other car companies in the world. They’re extremely good.”
On Friday, the Alliance for American Manufacturing sounded the alarm, issuing a report entitled: “On a Collision Course: China’s Existential Threat to America’s Auto Industry and its Route Through Mexico.”
The report, which lists policy recommendations to combat overcapacity and unfair trade practices, notes that BYD is building factories in Thailand and Hungary designed to be regional export hubs. It then adds:
“More alarming, however, are Chinese firms’ heavy spending on plants in Mexico, through which they can access the United States by way of the more favorable tariffs under the United States-Mexico-Canada Agreement (USMCA). This strategy is, in effect, an effort to gain backdoor access to American consumers by circumventing existing policies that are keeping China’s autos out of the U.S. market.”
There’s a saying that a business can’t disrupt itself. Legacy automakers are stuck in a cycle of continuing to improve their existing untouchable business lines and everything internally is oriented towards seeing continuous improvement without huge risk.
At some point customers are starting to think… I just need to get in my car and go somewhere. Does that really need to cost $58,000 base?
If some executive at Ford said hey let’s make a car that costs $12,000 he’d be tossed out the boardroom window. Ford doesn’t make money off cars like that.
As a newcomer BYD has a lot less to lose, so is better positioned to disrupt the whole industry. They don’t have incumbent lines of product to defend. So they can show up with alien technology or price points that just wouldn’t be interesting to a legacy.
I’m sure the people who work at BYD think of themselves as high tech innovators and wouldn’t even want to go work for a legacy given the choice.
It may or may not work… We’ll see. It’s certainly starting to look like Tesla is falling behind.