China Is So Far Ahead On Electric Cars It’s Now Afraid America Will Steal Its Trade Secrets!
Sometimes, the only way to navigate the chaos is to find a little distance, separating the momentous from the mundane. This is where irony comes in handy, and the automotive world is currently swimming in it. In this edition of The Morning Dump, we’re taking a look at the current state of affairs in the electric vehicle market, and how China’s meteoric rise has led to a rather unexpected fear.
If you’re familiar with the film Melancholia, you’ll understand the core concept here. One sister acts irrationally, refusing to abide by convention, while the other tries to be logical even as the world is ending. Ironically, the first sister’s belief that nothing truly matters is the only logical approach in a collapsing world. Now, picture a similar, albeit less bleak, scenario with electric vehicles.
At the center of this story: BYD expressing possible hesitation to build a plant in Mexico, reportedly due to China’s fear that its secrets may be stolen. The automotive world has reached peak irony. Vice President J.D. Vance has claimed pursuing cheap labor always has a cost to countries, which isn’t necessarily wrong, yet the U.S. government is trying to slow down the development of advanced electric cars in the United States. Also, President Trump is threatening to impose bigger tariffs on Japan, even though Japan doesn’t currently have tariffs on cars imported from the U.S. It almost feels like there’s too much irony to contain, but let’s keep going.
What’s more, GM is sometimes perceived as behind the technology curve, but now the company is ahead of the curve when it comes to electrified vans. The response from some? GM is possibly too far ahead.
There’s a narrative that China allowed the world to bring manufacturing to the country, only to steal the skills needed to build cars. To a certain degree, that’s what happened. However, it’s a different story with electrification. China poured billions into becoming a leader in electric vehicles. While some of the base knowledge came from other places like Germany and the United States (and was gained through joint ventures, not always IP theft), they’ve surpassed Western automakers in many areas of electric car development. BYD, like other Chinese automakers, has found a decent export market in Mexico and was planning to build a plant there. However, when this news surfaced, the American government reacted and imposed large tariffs on Chinese-built electric cars and pushed Mexico to make conditions difficult for BYD. The relationship between the United States and Mexico has shifted in recent times. Now, the Chinese government is concerned about the plant because, according to a Financial Times report titled “China delays approval of BYD’s Mexico plant amid fears tech could leak to US,” China doesn’t want the United States to do to China what China did to everyone else.
The commerce ministry’s biggest concern is Mexico’s proximity to the US
In the world of electric vehicles, China is the true innovator here, and not the intellectual property thief (even if some knowledge was built on stolen data). Therefore, the government’s concerns aren’t entirely invalid.
“Cheap Labor Is Fundamentally A Crutch”
Vice President JD Vance gave a speech to the American Dynamism conference, touching on industrial and immigration policies. He highlighted the belief that globalization would see rich countries moving up the value chain while poor countries handled simpler tasks. As an example, he cited Apple’s iPhone, designed in California but manufactured in places like Shenzhen, China. In this view, if advanced economies such as the U.S. lost manufacturing jobs, their workers would be able to find work in design or coding, thus continuing to prosper.
“I think we got it wrong,” Vance said. “It turns out that the geographies that do the manufacturing get awfully good at the designing of things.”
Given the above story about BYD, this is a little funny, but it’s also not entirely incorrect. The Clinton Administration’s neoliberal trade policies, the China Shock and the loss of jobs and industrial know-how for cheaper goods from Walmart and, now, Amazon. This impacted communities, especially in the industrial Midwest, which were hollowed out by plant closures and lost jobs. Places that once had a thriving middle class now struggle with poverty, drug abuse, and a longing for hope.
The Vice President noted,
“ Cheap labor is fundamentally a crutch, and it’s a crutch that inhibits innovation. I might even say that it’s a drug that the American firms got addicted to.”
Rather than invest in innovation, companies found it more convenient to offshore factories to economies with cheap labor or import cheap labor to produce goods.
This is where the speech gets slightly muddled. Cheap labor is a crutch, without a doubt, and it’s not wrong to see it as a drug. That being said, the assumption here is that service jobs are worse than industrial jobs. It’s possible, and even desirable, to let people transition from manufacturing jobs to something better. This reminds me of what John Adams, the first Vice President, said in a letter to his wife Abigail:
“I must study politics and war that my sons may have liberty to study mathematics and philosophy. My sons ought to study mathematics and philosophy, geography, natural history, naval architecture, navigation, commerce, and agriculture, in order to give their children a right to study painting, poetry, music, architecture, statuary, tapestry, and porcelain.”
This journey of moving up in the ranks from aluminum smelting to something easier and better-paying calls for investment. Unfortunately, the liberalization of trade didn’t provide solutions for the communities losing jobs.
The CHIPS Act and the Inflation Reduction Act aimed to address some of this, hoping to avoid losing the innovation race by encouraging investment in more advanced industries in the United States. However, the current plan is to undo these acts, which could affect jobs and the U.S. getting ahead in these critical areas. This might be why even many Republicans are trying to save the programs.
On the issue of immigration and labor, here’s a quote I saw written at Ellis Island:
“Before I came to America, I thought the streets were paved in gold. When I came here I learned three things: The streets were not paved in gold, the streets weren’t paved, and that I was expected to pave them.” – unnamed Italian immigrant.
Japan Is The Biggest Foreign Investor In The United States, Will It Be Punished For It?
America has a 2.5% tariff on cars imported from Japan, but Japan has no tariff on cars imported from America. Despite this, Japan has extremely strict homologation standards, making it hard for American companies to sell cars there. While those barriers do exist, Japanese preferences tend toward smaller cars which America doesn’t produce in large numbers, thus they import them in large amounts from Japan.
If the goal of the trade war is for fair and equal/reciprocal tariffs, and for more jobs to return to the United States, you’d think Japan would get a break. Japan has historically been the largest foreign investor in manufacturing in the United States. It’s not happening, and Japanese automakers are trying to figure out their next steps, reports Automotive News.
At the automaker level, cutting back on output was one “theoretical” option, Katayama said. “It was mentioned as an example of what we should think about in order to protect the state of the automobile industry as a Japanese export base. It does not mean that production will be halted.” In the meantime, JAMA wants the Japanese government to continue negotiating with U.S. trade authorities to win tariff exemptions. So far, such appeals have fallen flat, as the U.S. stands pat. “We discussed with the ministry our response to the U.S. government, focusing on our sense of crisis as an industry,” Katayama said. “We call on the Japanese government to continue its efforts to ensure that Japan will be exempted from the application of the additional tariffs.”
This affects all Japanese automakers. Specifically, Subaru and Mazda, who import more than half of their cars from Japan.
Chevrolet BrightDrop Vans Are Piling Up In Ontario
The Chevrolet BrightDrop van may be the best electric van for sale in America right now. Electric delivery vans are among the best uses for electric vehicles. These vans tend to stick to small geographic areas, idle frequently, and are often stored in a shared lot overnight. So why isn’t Chevy selling a bunch of them?
Sam Abuelsamid, vice president of market research at Telemetry Insights, mentioned that the extended range of BrightDrop vans is far better than its market competitors, but so is the price tag. Before incentives, the vehicles cost around $74,000. Ford’s E-Transit van with extended battery range, for example, is $51,600 — more than $20,000 cheaper — even before applying incentives.
“There is a market for electric vans,” Abuelsamid said. “Just not at that price point.”
Here’s an irony: did GM build the least popular van by building the best?
Range, which is an issue for regular car buyers, may not be a big deal for commercial buyers. They tend to be cost-conscious and are more aware of how far their vehicles will go.
The Big Question
What’s the most ironic moment in automotive history?
