Despite lofty US tariffs on Chinese automakers, US carmakers are already going head-to-head with Chinese producers in South American and European markets. Stella Li, BYD (BYDDY) Executive VP, claims that trade restrictions won’t help US carmakers, as only technological investment will determine “the final winner.” Tesla’s (TSLA) Elon Musk claims, however, that trade restrictions keep US automakers from being “demolished.”
Robinson Meyer, Heatmap Founding Executive Editor, joins Yahoo Finance to discuss the landscape of the EV market and the competition between the US market and Chinese automakers.
Meyer explains that tariffs will continue to be a stumbling block for regulators and auto suppliers: “What we’re seeing is that auto markets, especially European auto markets, are having a hard time figuring out exactly how to craft trade protections that on the one hand, keep this deluge of very cheap cars from China out of their domestic markets, protecting their local automakers and on the other hand… that keep local automakers, either domestic automakers, whether that’s Volkswagen (VOW.DE) or Peugeot (STLA) in Europe, or Ford (F) and GM (GM) in the US, competitive and at the cutting edge of vehicle technology. I don’t think any company or country has solved this problem yet but I think this is a major policy question going forward, specifically for the United States and Europe.”
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Editor’s note: This article was written by Nicholas Jacobino
Video Transcript
AKIKO FUJITA: Robinson, even though we’re talking so much about the US market, the reality is Western carmakers at least are already going head to head with these Chinese carmakers in markets like Europe. South America is a big battleground now. We had a chance to speak with Stella Li who’s the executive VP at BYD. I want you to listen to what she had to say about the protection that trade restrictions essentially create for some of these carmakers.
STELLA LI: So like a lot of OEM brand here, if they don’t participate the global competition to be better, they will be out. And the trade protection will not help you. I never believe, like, a trade protection will help any company. Yeah, because if you see who are the winner is the company who really change to get all technology will be the final winner.
AKIKO FUJITA: As a reminder, of course, any Chinese car import coming into the US is subject to 25% or a little more than that in terms of a tariff. We’ve heard the likes of Elon Musk, right, say, essentially, if you get rid of these, other carmakers are going to be demolished. The competition will be demolished. How do you see this? Is that really the one thing that’s keeping Chinese carmakers from really capturing the global market here?
ROBINSON MEYER: Well, I think that, first of all, Chinese carmakers are already plunging ahead in a lot of global markets. So BYD, for instance, is a great example. It’s opened factories in Brazil, Thailand, Hungary, Uzbekistan, in addition to the 3 million cars per year capacity that it already operates in China.
It’s looking at opening a factory in Mexico, which would, of course, then make those cars subject to USMCA free trade provisions. What’s keeping it out of the US right now is just the fact that it hasn’t really tried to sell cars in the US. It does sell buses here.
More broadly, what we’re seeing is that auto markets, especially European auto markets, are having a very hard time figuring out exactly how to craft trade protections that, on the one hand, keep this deluge of very cheap cars from China out of their domestic markets, protecting their local automakers, and on the other hand, exactly as Ms. Lee said, that keep local automakers, their domestic automakers, whether that’s Volkswagen or Peugeot in Europe or Ford and GM here in the US, competitive and like at the cutting edge of vehicle technology. And I don’t think any company or country has solved this problem yet. But I think this is a major policy question going forward, specifically for the United States and Europe, as they try to figure out how do we keep these automakers alive during what is basically a second China shock in the automotive sector, while at the same time making sure that these automakers can stay competitive, that they can keep up with Chinese companies who often are ahead of them, specifically on questions of battery chemistry and software integration with the vehicle.