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Runtime: 11:10
0:00 Chinese EV Makers Got $230 Billion In Subsidies
1:20 China Sales Down, NEVs Up
1:59 Canada Considers China Tariffs
2:26 BYD = 10,000 Jobs in Mexico
3:11 BYD Selling Car Insurance
4:43 Bugatti’s Over-The-Top Tourbillon
6:54 Nio Unveils 4th-Gen Swap Stations
7:32 BMW Scraps $2B Northvolt Deal
7:59 ZF Airbag for Level-3 Cars
8:42 Porsche Opens Full Scale Climate Wind Tunnel
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CHINESE EV MAKERS GOT $230 BILLION IN SUBSIDIES
It’s getting tougher and tougher for foreign car companies to compete in China. Nissan is closing one of its plants in Changzhou as sales slump in the face of intense Chinese competition. One reason Chinese EV makers are doing so well is that they’ve been massively subsidized. The Center for Strategic and International Studies estimates that Chinese automakers received $230 billion in subsidies over the last 15 years, or $15.4 billion a year. Those subsidies came in the form of sales-tax exemptions, rebates to buyers, R&D support and government spending on infrastructure. And that’s a conservative estimate. It does not include subsidies from large cities like Beijing and Shanghai. Nor does it include support for battery companies. But China is starting to phase out subsidies to force EV makers to stand on their own two feet. Last year those subsidies came to $4,500 per vehicle, which is less than the $7,500 rebate available to EV buyers in the U.S.
CHINA SALES DOWN, NEVs UP
But even though they’re being slowly phased out, those subsidies in China are still significant and they continue to push more consumers into NEVs, or New Energy Vehicles. The China Passenger Car Association estimates that sales of locally made cars will fall 7.6% this month, compared to last year. But it expects sales of NEVs to go up 7.1% and reach a new high of 49.1% share of the entire market. It expects consumers to buy 860,000 EVs and PHEVs.
CANADA CONSIDERS CHINA TARIFFS
Canada watched the U.S. add 100% tariffs to imported Chinese cars. And then it watched the EU put tariffs as high as 38.1% on some EVs. And then it decided it better take action of its own. Bloomberg reports that publicly, Canada says it’s studying the issue, but behind the scenes it’s preparing to take action, probably with higher tariffs.
BYD = 10,000 JOBS IN MEXICO
BYD’s planned plant in Mexico is going to be one of the larger ones in the country. The company’s General Director of Mexico, says the facility will create 10,000 jobs. But not all of those workers will be directly employed by BYD, the number will also includes contractor and supplier employees. But that will still make it larger than other car plants in Mexico. Volkswagen operates the largest plant in the country, which employs 6,100 assembly line workers and 5,000 supervisory employees. Mexico is becoming an important market for BYD and it’s on pace to sell 50,000 vehicles there this year.
BYD SELLING CAR INSURANCE
And in other BYD news, the company is expanding its car insurance business in China. BYD began offering its own insurance in 2021 but it was limited to a few markets. Now, the automaker is expanding it to seven major provinces in China. Tesla pioneered offering car insurance to customers back in 2019. This is a good source of revenue for the automakers. And with connected car technology, they can monitor how owners drive and write a policy tailored to each driver.
BUGATTI’S OVER-THE-TOP TOURBILLON
Here’s a car I’ll probably never be able to afford, but am still awestruck by and will probably spend hours reading articles and watching videos about it. This is the Bugatti Tourbillon, which is the successor to the Chiron and gets its name from a mechanism in high-end watches that increases accuracy. It’s also fitting because the driver cluster was developed by a Swiss watchmaker and crystal glass, like you might find on the face of a watch, is used on the center console. The cockpit appears to wrap around the two seats with an arch forming over the door, dash and center console that draws your eye out into the horizon. The exterior design of the Tourbillon is not a far departure from the Chiron. The nose and tail of the car look like they’ve been elongated, but actually it’s only an inch longer and the styling is a bit more aggressive. You might think it has the same quad-turbo 8.0L W16 engine, but surprisingly a new engine was developed for the car. It’s still a 16-cylinder, but the block is set up in a v-pattern, there’s no turbos and the displacement has been increased to 8.3L. The naturally aspirated engine makes 1,000 horsepower, but since this is the age of electrification, there’s also a front e-axle with two electric motors and another electric motor on the rear axle. Combined the three motors make 800 horsepower, so total system output is 1,800 horsepower. Bugatti says it will do 0-100 km/h in under 2 seconds and tops out at 277 MPH. It also has a decent-sized 800-volt battery pack at 25 kWh, which provides a range of 60 km or about 37 miles. The Tourbillon will cost 3.8 million euros, but it will be limited to 250 examples and won’t start reaching customer hands until 2026.
NIO UNVEILS 4TH GEN SWAP STATIONS
Chinese EV maker Nio recently rolled out its 4th-gen stations. They can now perform automated battery swaps. Owners just have to tap a button on the center screen and they don’t even have to be in the car. The new stations can perform swaps in just 144 seconds, which is 22% faster than before and they can swap up to 480 batteries a day. Another benefit is they can accommodate multiple brands and different models. Nio operates the largest battery swapping network in China with more than 2,400 stations.
BMW SCRAPS $2B NORTHVOLT DEAL
BMW is scrapping its $2 billion battery deal with Swedish cell maker Northvolt. According to reports Northvolt was not going to be able to deliver on a contract it signed with BMW in 2020. Instead it will now help BMW develop cells and BMW will try to work on building a battery network in Europe. But we think it may have to turn to the Chinese for help now.
ZF AIRBAG FOR LEVEL 3 CARS
For airbags to work properly, the front occupants have to be properly seated and upright. But what happens when Level 3 autonomy, hands-off and eyes-off, becomes commonplace? People may tilt back or sprawl out in their seat, and that means the airbag may not protect them in an accident. So ZF’s passive safety systems division, Lifetec, developed an airbag for autonomous cars. It features a contoured design that can inflate to two different sizes, depending on the person’s seating position and their weight. Interestingly, the company, which is an Autoline sponsor, established an R&D center in Michigan for its global airbag development.
PORSCHE OPENS FULL SCALE CLIMATE WIND TUNNEL
Automakers will take cars all over the world to test them in the freezing cold and sweltering desert, but Porsche doesn’t have to do that. Two years ago, it created a climatic wind tunnel. You’ve probably heard of climate chambers that do the hot and cold thing, and wind tunnels have been around for a long time. But Porsche is the first we’ve heard of to combine the two. And it’s not just hot and cold. It can simulate a monsoon or drizzle and even mimic the changing positions of the sun.
But that brings us to the end of today’s show. Thanks for making Autoline a part of your day and I hope that you have a great weekend.
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Sean, In a perfect world, each country would produce its own cars and trucks so they are suited to local conditions and to avoid the pollution created by shipping vehicles halfway around the world. The sooner that day arrives, the better. However, in the meantime, it is worth looking at things from a non-American centric view. China sees that Canada and Mexico ‘cooperated’ with American car companies and ending up having NO domestic car industry at all. Any country would wish to avoid that and anything the Chinese do in their home market is their own business. The US should block them from the US and they should block the US from their market. Neither country is entitled to a share of sales in the other. The US says it is interested in free trade, but ONLY if the US comes out ahead. If you disagree, have a quick look at the US-Canada softwood lumber agreement. The US agreed to a treaty and then has ignored that treaty for your entire lifetime. I don’t like the way the Chinese compete, but I can’t honestly say that they are worse or even much different than the US. Both believe that winning is everything and how you win is not that important.
I will be disappointed when Canada imposes large duties on Chinese vehicles. It will protect a part of the economy (10% of manufacturing GDP) but penalize all consumers. We will force people to spend more than they need to for transportation in order to support one industry. We already do this with milk products and it’s wrong.
Albemarle- I have to disagree that protectionism isn’t needed. I mean if your only goal is to get cheap products thats great short term. Play a game of Monopoly and buy all the cheap stuff and see how that works out for ya. A healthy economy needs manufacturing and if that manufacturing is competing with a country that pays its workers 1/10th then guess what? Yes, you will get cheaper products for a while until no one can afford those products because the good paying jobs are gone. The domestic manufacturer will cut pay to be competitive with the other countries and eventually you can make the same pay flipping burgers.
When you look at a global economy you need to take into consideration what is the pay for that job worldwide. So, if you build cars, appliances, clothing you take what is the average pay for that job worldwide and that’s what you can expect to get in the end. Its already happened with Clothing and electronics as all those jobs are basically gone in the US. You can’t expect everyone to be bankers, Drs and lawyers or trade stocks. The middle class is disappearing with those jobs leaving us with a two-tier economy. Those that have and those who do not.
I would much rather have a high pay and expensive cars, that also allow me to afford a home and cost of living in the US than to live like I would in a third world country with multiple families in a single wide trailer with my cheap Chinese car.
The problem is people will allow it to slip away slowly because we get cheap products in return. Meanwhile you’re selling you soul and will have to pay for it in the end. The Chinese are not stupid, and they are playing the long game. They are being very strategic about the investments they make and the ventures they get involved in. They allowed us to come to their country and teach them to build cars with a required joint venture. Then once they got what they need they build their own vehicles and set out to decimate the other manufacturers. And if you think Mercedes and BMW are safe the Chinese will be making high end luxury cars to eat into their shares too. Just like Hyundai they’ll start entry level and progress into mainstream and then luxury and commercial. So yea cheap products sound great until you see the long term affects. Not to mention that making it even harder to compete when the Chinese government subsidies the manufacturing in the tune of 15.4 B a year. Sure thats fair trade.
It would be truly dismal for consumers if Americans could only buy vehicles from American companies. The only cars would be Mustang, Corvette, C4, and C5. Of course, a lot of transplants are making cars in the US, but there seem to be efforts to support “American” companies. Is former Chrysler group, with its headquarters in Michigan an American company, or is it a completely foreign company because Stellantis is officially based in the Netherlands?
I’d like it if the US and EU would standardize on regulations. Then, it would be possible to buy an RWD diesel 3 series wagon in the US.
Yeah, it is not “fair trade” that the Chinese government subsidizes car companies, nor is the $20B/year US subsidies to the oil industry such a great thing, overall.
The thing missing from a lot of this discussion, is that the Chinese make good stuff. The same applies to Hyundai/Kia. They started out selling crap in the ’80s, but now, H/K have what many consider the best-in-class mid-size CUVs with Palisade and Telluride. I might have bought one of those rather than a Highlander hybrid, if I didn’t like good gas mileage.
I find it sad that the former big 3 have decided to quit being full line companies, abandoning what is still ~3.6M units a year.
https://diminishedvalueofgeorgia.com/car-sales-in-the-us-is-the-tide-turning-for-sedans/#:~:text=The%20latest%20data%20from%20Q1,in%20the%20US%20since%202002.
What a great show today,perhaps your best yet
Companies are their own legal entities. Some make good decisions and fly, others don’t and should die
It’s when governments get into picking winners that we have problems. Like the SPACS that Autoline After Hours discussed yesterday companies that are the darlings of the government and unions know they can load up on waste and still be ok.
Support with R&D and other programs. Help them to be competitive. Don’t just provide price protection from the big bad Chinese.
There is no moral difference between China supporting their auto industry and the U.S. giving $12B to the auto industry (Reuters)
Many have forgotten the deadly Chinese smogs of less than 20 years ago. Subsidies to make electric cars cleaned up what was killing and hospitalizing their own people. Cheaper to make EVs than pay the health and burial costs.
Personally, I would prefer a performance based quota and no tariff. Require import cars to be at least equal to our domestic cars … EPA tested.
Shanghai was full of 2 stroke mopeds and scooters when I was there 30 years ago. Replacing those with EVs has probably cleaned up the air, even more than the electric cars. Also, the buses smoked horribly then. I suspect there are a lot of electric buses now.
Regarding Tourbillon, while it’s difficult to make out in pictures, or in the video from Friday’s report, but, is it just me, or does the steer wheel look huge?! I mean, like it might be over sized to fit the center mounted speedometer and other driver assistance tech?
While it may be true that various Chinese leaders have provided different subsidies to support local businesses and their citizens, that is there right to do. If tax payers pay their local government and that government then turns around and invests in its community, no one can fault them with doing that. Yet, when the businesses then use that support to sell beyond those shores and can do so at not just a lower price, but well below be the product of the local competitor in whose market they wish to compete, AND still make a sizable profit, you can see where the local maker might take issue with that. The thing that the subsidy figure may not include, is the fact the those building the product, aren’t building them using the same work rules/safety requirements that many of the our competing countries HAVE to. That too adds cost to the amount of their local product. So it’s difficult to capture all of the different ways these products may represent and uneven playing field with others around the world. Yet, it can’t go unnoticed where they learned that from?! Some of the major, legacy OEMs that used Chinese man power to make and sold those goods around the world!
Here is the thing, to get around the tariffs, what if Chinese OEMs said that they will just sell their products competitively against their local counterparts? So, at the end of the day, while they may have cost parity with the local product, they still bring home anywhere from 1/3 to 1/2 more money in profits, per vehicle! IMHO, at the end of the day, what will determine a buyer’s choice will come down to the strength of the product sold. Luxury goods, people know and expect to pay more for them. The challenge will be with mass market OEMs, who focus on rock bottom prices. The lowest price and the biggest discount plays right into the hands of what is feared about product coming from China. With new product coming from unknown brands, local players have to shine up and demonstrate the value of their product, not just how lower they can go on price! Buyer may spend a little more on what they want, but if dealers raise prices on that product to line their own pockets, they may just be handing customers over to the lower priced, over seas competition!
To me China is like a Walmart entering a small town. Say you own the local hardware store and it’s been handed down in your family for over 100 years and you’re not rich, but you have supported your family okay and few other employees over the years. You have a reputation for being fair and honest and have a modest mark up on most products. Let’s say you markup lawnmowers 10% over your cost. You can buy a rider for $2000 and you sell it for $2200. You sell about 15 mowers a year. Then Walmart moves in, and they have thousands of stores nationwide and a buyer that negotiates a price with the manufacturer to get that same mower at a cost of $1500 because they buy 20,000 a year. They mark it up 20% to $1800 that’s $400 under your price and $200 under what you even pay to buy them. You would have to lose $200 on each one to match Walmart. Walmart is making $300 on each sale compared to your $200 and still sells it for less than you. Thats how they kill small business. It’s easy to say just lower your prices and be competitive. When you don’t have the volume of a big box store and can’t get the discounts they get.
People will say, But I want to support local business until it comes to paying $400 more for the same product. Low-cost rules and yes having competition is a good thing and it forces companies to innovate and stay competitive. I have no doubt the threat of Chinese imports is making the other OEMs step up their game and try and figure out how to be competitive with China. So, what can a company do to cut cost? They can look for cheaper materials. Less labor and less pay. But that has limits. The things they can’t get around is taxes, regulations, permits, OSHA, workman’s comp, paying into SS, EPA, FTC, SEC, FDA etc.. Does China have such costs? Government regulation (which some is needed) costs businesses in the US anywhere from 300-700 billion depending on which site you find.
Again, it comes down to a level playing field and here in the US we are our own worst enemy. We can regulate, permit and tax most small businesses out of existence while providing large companies tax breaks incentives to compete with the small companies. Expect the large companies to meet all the gov regulations that importers don’t deal with and think we somehow could ever be competitive. It won’t happen it can’t happen and in the end those jobs go overseas and leave you with nothing but service jobs and highly skilled jobs. Wiping out the middle class.
A 74 year old hardware store where I am has survived the arrival of Lowes, Menards, and Walmart, and has outlasted Ace, 84 Lumber, Furrows, and a couple others I don’t remember. They are a great place to get fasteners, metric and English, and also have plumbing and electric items, etc. I go there for some things, even though I probably pay a little more, because they have things I want, and show me where they are, or with nuts and bolts, usually pick them for me. Yeah, places like this probably can’t compete with the big box stores for some things, but well run small stores can survive, even with a Menards or Lowes a mile away.
Kit- I think you missed the point. That being, many companies can’t compete on price even if they could sell at cost. So, you can cut and cut until you have a substandard product, or you may find a way to offer something others don’t have. In your example yea the customer service is why you are willing to pay a nickel more for a nut and bolt. Are you willing to spend $400 more for that customer service? What’s the threshold that supports buying American over foreign imports assuming everything else was equal? American dealerships have plenty of room to improve customer service, but I doubt that could be enough to demand a few thousand more for a vehicle.
Amazon is another perfect example. Many people will shop local for stuff and then you hear them say something like. “Well, I don’t need it right now, and I can get it for half that price on Amazon”. I’ll just order it when I get home.
Items that don’t really require customer service really makes it hard to compete. Becoming as large and as efficient as Amazon makes it almost impossible for anyone to compete on that scale.
Actually, I buy things from Amazon, because I’ve had too many cases of going to 3 or 4 local stores looking for something without finding it, but I can find it in a minute or two by searching Amazon.
When I can, I use alternatives to Amazon, like jcpenney.com for jeans that aren’t in local stores.