Sudden Surge in Chinese Car Exports
Brad Setser has an interesting thread on China’s sudden surge in car exports.
The US Hasn’t Noticed That China-Made Cars Are Taking Over the World
Bloomberg reports The US Hasn’t Noticed That China-Made Cars Are Taking Over the World
Overseas shipments of cars made in China have tripled since 2020 to reach more than 2.5 million last year, according to data from the China Passenger Car Association. That’s only a whisker (about 60,000 units) behind Germany, whose exports have fallen in recent years. China’s numbers, behind Japan but ahead of the US and South Korea, herald the emergence of a formidable rival to the established auto giants.
Chinese brands are now market leaders in the Middle East and Latin America. In Europe, the China-made vehicles sold are mostly electric models from Tesla Inc. and Chinese-owned former European brands such as Volvo and MG, and European brands like Dacia Spring or the BMW iX3, which is produced exclusively in China. A raft of homegrown marques like BYD Co. and Nio Inc. are ascending as well, with ambitions to dominate the world of new-energy vehicles. Backed by Warren Buffett’s Berkshire Hathaway Inc., BYD is already charming EV buyers in developed countries such as Australia.
It’s just the beginning, according to Xu Haidong, deputy chief engineer at the state-backed China Association of Automobile Manufacturers. The target is to sell 8 million passenger vehicles overseas by 2030—more than twice Japan’s current shipments, he says.
The trend underscores that China has moved beyond being the “world’s factory” for low-cost consumer electronic devices, appliances and Christmas toys. By shifting to more complex and sophisticated products for competitive, highly regulated markets, Chinese companies are moving up the value chain in manufacturing—a key driver of growth that transformed the once-struggling communist economy into today’s quasi-capitalist $18 trillion juggernaut.
“The switch to battery means the motor is no longer a differentiator,” says Alexander Klose, executive vice president for overseas operations at Aiways Automobiles Co., a pure-Chinese EV maker, which has sold several thousand vehicles in Europe. Technologically, “it’s created a level playing field,” he says.
China’s Rapid Gain in Competitive Advantage
Q: How do you explain this rapid technological progress of China, @Brad_Setser?
A: Western firms set up shop to supply the JVs, China has a deep manufacturing ecosystem, China’s government provided a ton of support for EVs and batteries and Chinese engineers are good. And now they have an exchange rate assist when exporting.
Meanwhile the US and EU are bickering over the implications of Biden’s Inflation Reduction Act.
Biden’s IRA will not do a damn thing to reduce inflation but it has EU business leaders very concerned.
Under WTO rules, much of Biden’s IRA is really an illegal subsidy. The EU cannot do in 5 years what the US can pass in a session if one political party is in clear control.
Importantly, Germany is upset because the US is handing out free money clean energy subsidies despite WTO rules and it can’t. Germany’s export model is now burnt toast.
What about China’s subsidies under the WTO?
This post originated at MishTalk.Com.
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Mish
The benefits of industrial espionage, slave labor and pollution. Shouldn’t they be making high speed trains to satisfy the green nut jobs?
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