As China takes a decisive lead in the global race for affordable electric vehicles, U.S. automakers such as Tesla now find themselves forced to fight back quickly before losing their grip on the domestic market.
Growing rivalry on the electric vehicle front
Long comfortable in their dominant position, the American automobile giants must now face a formidable challenge from China. The meteoric rise of Chinese manufacturers of low-cost electric cars, on the verge of dethroning Tesla as the world’s largest producer, has sounded the alarm for companies such as General Motors and Ford.
However, in 2011, Elon Musk was still openly mocking the ability of BYD, the Chinese manufacturer supported by Warren Buffett, to produce electric vehicles worthy of the name. But this company quickly caught up. Today, a third of electric vehicles sold worldwide come off its assembly lines, compared to only 15% in 2020.
For too long, American manufacturers have underestimated their Chinese counterparts. Now, warnings are coming from all sides. At an investor conference in January, Musk himself sounded the alarm, warning that Chinese cars “ would practically destroy » American manufacturers if they were allowed to enter the American market. GM and Ford also recognize that they must accelerate to offer affordable models, before China definitively takes the lead.
While Tesla and the big names focus on a few high-end models, Chinese brands already offer a wide range of prices, from entry-level city cars to luxury cars, including family SUVs. And while the Americans strive to conquer their own market, Beijing is now targeting exports, including to the United States.
“ It’s time to review preconceived ideas about the inferior quality of Chinese manufacturers“, analysis Tu Le, a renowned expert on the Chinese market. “ Currently, faced with this offensive, traditional manufacturers simply do not have competitive products to oppose.“
American manufacturers struggle to remain competitive
An unprecedented earthquake shakes the established order of the global automobile industry, comparable to the irruption of Japan on this market in the 1970s. The stakes are colossal: an industry which weighs 104 billion dollars and supports 3 million people. jobs in the United States.
“ It’s a global upheaval that American manufacturers simply haven’t paid the necessary attention to.“, deplores Tu Le, renowned expert.
Although sales of electric vehicles have crossed the million unit mark in the United States, manufacturers are still struggling to attract beyond the first buyers with models often overpriced by $10,000 compared to thermal equivalents.
Faced with this challenge, Ford and GM are now focusing all their efforts on the development of affordable mainstream models. For its part, Tesla has been promising a $25,000 model for years, but has so far failed to achieve success.
Meanwhile, China is flooding the market with a plethora of offerings, covering all price segments, from $10,000 city cars to floating premium SUVs priced up to $100,000.
Expansion to Europe and the United States
Taking advantage of advantageous labor costs, China is also banking on controlling the entire supply chain, an industrial ecosystem that the government has been methodically structuring for more than a decade. Many Chinese companies, like BYD which supplies Tesla batteries, sell their components to American brands.
However, despite this massive offensive on all fronts, many obstacles remain for China. The domestic market is experiencing a slowdown and production overcapacity makes it imperative to find new external outlets.
Hence the strategic interest in penetrating the European and American markets. If access to the Old Continent seems relatively easier, notably with a factory project in Hungary, the United States market remains solidly protected by significant customs and regulatory barriers.
To get around these obstacles, Chinese brands are now considering establishing themselves in Mexico, at the gateway to the North American market. But the road remains strewn with regulatory, commercial and even national security considerations.
A high-intensity standoff is therefore looming between the imperatives of competitiveness for consumers and those of preserving employment and the strategic interests of national industries. The very future of the global automobile industry could well be at stake.
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