Chinese automakers are ready to disrupt the US electric vehicle market after years of planning.
Industry observers predict that Chinese automakers will soon export their excellent — and crucially, affordable — electric vehicles to the US. The businesses have been threatening to open offices in the US for years, but they are now closer than ever to doing so.
Chinese businesses have already defeated American rivals on their home territory, stealing market share from the likes of Ford and General Motors by providing consumers with better-quality and more affordable electric automobiles. They have also begun selling a variety of products to Europe.
The key question is whether Chinese auto industry heavyweights like Nio and Geely can overcome political tensions and whether American consumers will follow them there.
“It’s going to be an interesting couple of years ahead to see whether Ford and GM and the like can stave off that Chinese competition coming in,” said Martin French, managing director of the consulting firm Berylls. This year’s Shanghai car show revealed that the competition is very, very real.
In recent years, China’s EV market has grown tremendously. 800,000 new EVs were sold in the US in 2022, and 5 million all-electric passenger cars were purchased in China. A Chinese business, BYD, is ready to dethrone Tesla as the largest EV manufacturer in the world after many years of dominance.
Hyundai, Toyota, and now BYD
Japanese automakers like Toyota and Honda swooped in the 1970s with inexpensive and fuel-efficient cars that sent US automakers reeling. Hyundai and Kia, two Korean automakers, have recently been eating Ford and GM’s lunch when it comes to SUVs.
The past might repeat itself. By entering the market at a low price point, Chinese EV makers can establish a presence in the US, according to analysts.
Is it conceivable for Chinese businesses to replicate what others have done, but with electric cars this time? The response is unmistakable, said Bill Russo, a former Chrysler executive and the CEO of Shanghai-based advising company Automobility. Who doesn’t want accessible cars?
However, as political tensions between China and the US rise, China may find it more difficult than Japan or Korea to enter the American market. Analysts said that politicians are expected to scrutinise any Chinese company with aspirations to do business in the US more closely in addition to general concerns from consumers who may be less inclined to support a Chinese brand.
The Biden administration’s new tax credits for EV purchases favour vehicles made in North America with battery components that don’t come from China, while a 27.5% import tariff from the Trump era still applies to Chinese automobiles.
Price-wise, China is prevailing.
American companies have long promised a long-range EV alternative for under $30,000, including EV leader Tesla. However, advancement has been sluggish and occasionally backward. By the end of 2023, GM intends to discontinue the Bolt EV, which is currently the least expensive EV in the country, and use that factory to produce expensive electric pickup trucks.
On their home soil and in Europe, Chinese brands are unrivalled for cost.
The Wuling Hong Guang Mini, a tiny city car that costs about $5,000, is one of the most well-known EVs in China. Last month, BYD unveiled the Seagull, a chic, little hatchback with an estimated range of 190 miles, at the Shanghai auto show. Its initial cost is under $11,000.
Chinese businesses aren’t sacrificing quality for price, according to Tu Le, managing director of Sino Auto Insights, a consultancy organisation that focuses on the Chinese auto industry.
He said, “They have the products to back it up. “I’ve driven a number of the Chinese EV brands, and boy, oh boy, the Europeans are in trouble.”
However, Chinese dominance won’t materialise immediately.
Even if Chinese brands eventually reach American soil, it won’t be all at once. Before fully committing, these businesses are likely to test the waters with low-volume launches and research the market. Only a few of the dozens of companies that might be interested in a piece of the action will be able to sell in the US in any substantial quantities, according to Le.
According to Russo, Geely and BYD are the two automakers that are most likely to make their mark first. (BYD’s CEO recently indicated the company isn’t currently eyeing the American passenger-car market, but the company does already have a small commercial vehicle footprint here).
Polestar, a Geely and Volvo-owned Swedish EV brand, already imports from China. Startup Nio has stated that it will reach the US by 2025. The following phase, according to Le, is for Chinese companies to establish manufacturing facilities in North America once they gain a footing in the market. In order to compete properly over the long term, new entrants will need to build locally due to the scale of the US auto industry, he said.
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