Lars Penning/picture-alliance/dpa/AP Images
New Dolphin vehicles from Chinese car manufacturer BYD are seen at the BLG Auto Terminal Bremerhaven in Germany. The company is now selling EVs for as little as $11,000 in some countries.
For the past several months, a narrative has cemented about lagging electric-vehicle sales and pullbacks from the leading car companies. The Biden administration has paid attention, reportedly deciding to phase in restrictions on tailpipe emissions more slowly, so automakers would have more time to build out an emerging network of charging stations and open new plants for EV production. The overriding sentiment is that the transition will not happen overnight, and even that companies must do more to make consumers comfortable with EVs.
Amid this doom and gloom, it may surprise people to know that EV adoption is moving at or above the expected rates. A report from Clean Investment Monitor released last month compares the actual takeup of EVs in 2023 to projections that three leading modelers made when analyzing the Inflation Reduction Act (Energy Innovation, the REPEAT Project from Princeton University, and Rhodium Group). And it found that zero-emission vehicle sales were at the top end of those projections, with 1.43 million sold in the U.S. last year. While the range of estimates put EV sales between 8.1 and 9.4 percent of all vehicles, the actual number was 9.2 percent. (Globally, EV sales rose even faster.)
Mind you, these 2023 sales all happened before the $7,500 EV rebate in the IRA was improved so customers can take it at the point of sale, rather than having to wait for it until tax season. Add to that the continued buildout of charging networks and additional models, and the transition that already was moving at a pretty rapid pace is poised to accelerate. When ExxonMobil and Saudi Arabia are talking about producing lithium, you know that the die is cast.
But the balance that Joe Biden and his allies always wanted to strike on EVs was to both electrify transportation and green the planet and support good-paying domestic auto jobs. The UAW’s efforts at unionizing factories outside the Big Three, including EV factories, puts the country in position to deliver on that promise. But the looming threat to the concept comes from China, which has soared ahead in EV production, particularly from BYD (which stands for “Build Your Dreams”), a state-subsidized firm that has gotten support from Warren Buffett in the past. (Buffett sold a bunch of shares last year.)
BYD switched over entirely to plug-in hybrid and electric vehicles, and is actually a model for how to make that work. They sold three million EVs last year, and continue to add capacity, including a proposed factory in Mexico and several other places in South America and Europe. It is now the largest EV manufacturer in the world, surpassing Tesla. (Amusingly, this has Elon Musk, who sells Teslas all over the world, begging for high trade barriers.)
There is not a single BYD car on the road in America—there are BYD electric buses, some made at a factory in Lancaster, California, that I’ve been to—but the Biden administration clearly sees BYD’s potential impact. Some BYD vehicles retail in China for as low as $11,000, thanks to the country’s hammerlock on battery materials and use of cheap labor. Other Chinese cars are here; Geely makes the Polestar and Volvo, and Buick is now a Chinese model. You could easily see BYD joining these, flooding into the U.S. and serving customers for whom EVs are completely out of reach right now.
So the administration announced last week an investigation into electric vehicles produced in China. The nominal reason is potential national-security risks from auto software, cameras, and sensors that may spy on its passengers or allow for remote shutoff; the real reason is that a surge of cheap Chinese EVs could devastate the domestic market. (All Chinese cars in America today have software developed in the U.S. or Europe, incidentally.) Biden isn’t really trying to hide this: “China’s policies could flood our market with its vehicles,” he said in a statement last week. “I’m not going to let that happen on my watch.”
In a way, this is the severely damaging posture of outsourcing and globalization coming back to once again bite U.S. companies and workers.
We have been here before. The United States invented the solar panel and then business leaders moved the production to China, which produced them cheaply. By the time U.S. firms wanted to re-enter the industrial production markets, China had taken over. An investigation revealed illegal dumping of Chinese solar components and violations of trade laws, and the Commerce Department readied countervailing duties. But the domestic solar installers coveted those cheap products, and got the Biden administration to delay the sanctions.
Politically, Biden has little choice here, given who he’s running against and the threat to his domestic manufacturing agenda, where he has a good story to tell at the moment. The workers on the front lines of Chinese entry into the auto market live in Midwestern states Biden must win to earn re-election; the heart of the manufacturing renaissance is in red states where Democrats need to gain a foothold.
But as Robinson Meyer writes, it feels like a losing battle. There are already 25 percent tariffs on Chinese autos, and both Biden and Donald Trump have talked about raising them more. But you could double or even triple BYD’s tariffs and they might still come in under most domestic EVs. And a Mexican factory would qualify BYD under the North American free-trade agreement to opt out of those tariffs, though I’m sure policymakers are thinking about how to avoid that circumvention.
On the other side of this divide are environmental advocates who need the EV transition to expand, and will undoubtedly see Chinese EVs as a way to penetrate lower-income sectors of the economy. Consumers might not want to be prevented from access to a cheap electric car either. The one caveat is that there’s a strong feeling of security associated with auto purchases, and new brands can take time to hit that level. Vinfast, made in Vietnam by a company that initially sold ramen noodles, has had slow going in the U.S.
The primary reason BYD can drive EV prices so low is threefold. One, they’ve committed to an all-EV future, in ways that Ford and GM haven’t; they’re still wedded to the high-margin trucks and SUVs that sell well in the U.S. Two, their labor and environmental standards for production are simply lower. Three, they benefit from China cornering markets on the components of these vehicles, like the production and processing of certain minerals. In a way, this is the severely damaging posture of outsourcing and globalization coming back to once again bite U.S. companies and workers.
We have all-electric plays in the U.S., but the Big Three are hamstrung by being wedded to profitable SUV and trucks. Developing the know-how to make EVs work requires commitment. On the second point, the better role for U.S. policymakers is to use the higher carbon footprint from Chinese production to make a border adjustment, so U.S. manufacturers aren’t put at such a disadvantage with cleaner processes. That seems more viable than a thinly veiled national-security investigation.
Most importantly, the EV market is gradually becoming an ecosystem in the U.S., with excavation, processing, production, and recycling. But the way to fend off Chinese imports is to accelerate that ecosystem building, precisely at a time when the big automakers want to go slow. The more minerals (hello, Salton Sea) and domestic components that can be produced here, the cheaper the assembly process gets. American auto firms are investing and minerals firms are booming, aided by federal dollars. This is the only path to competition that doesn’t completely decouple the U.S. from China. (Oddly, there’s a threat from minerals prices plunging too low, which has led firms to pull back from investment.)
This is asking a lot, to reverse the trend of the past 40 years. But it’s inescapable, not just to preserve domestic industry but to preserve the transition more broadly. We have too many people to get by with just BYD and a couple other car companies. U.S. automakers, and those automakers with plants in the U.S., have to survive.
