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Chinese electric car makers once mocked by Elon Musk are flooding Europe with affordable EVs - will they make it to the US?
- Chinese EV maker BYD surpassed Tesla this year to become largest in the world
- Nearly 350,000 EVs were imported to Europe in the first six months of 2023
- Ford and GM are embroiled in their own battle over the use of Chinese batteries
UPDATED: 13:19 BST, 2 October 2023
When Elon Musk was asked in 2011 whether the Chinese electric car maker BYD posed a threat to Tesla, he laughed. But they are the ones laughing now.
'Have you seen their car?' he quipped. 'I think their focus is and rightly should be making sure they don't die in China.'
This year, Shenzhen-based BYD, backed by investor Warren Buffet, surpassed Tesla to become the top-selling EV brand in the world - and is on track to become the first to make more than two million vehicles in one year.
Thanks to generous subsidies from the Chinese government, China is now pumping out more EVs than they know what to do with. Not only are they highly affordable, but they are increasingly advanced.
The allure of these cars has led Europeans to buy them in droves. But US import tariffs - and their exclusion from a popular $7,500 federal tax exemption - have kept them well away from North America.
The BYD Atto 3 is among the most popular Chinese electric cars to have made it onto the European market, where it starts at around $38,000. In China it sells for $20,000
Chinese companies exported nearly 350,000 EVs to nine European countries in the first half of this year, according to data from the China Passenger Car Association. This is more than in the entirety of 2022.
Among them is BYD's very popular Atto 3, which is sold for $38,000 in the UK and Europe and just $20,000 in China. But for now it has no future in North America.
Stella Li, a senior vice president at BYD, told Bloomberg in June that trade barriers imposed by the Biden administration were a deal breaker - citing the Inflation Reduction Act.
This states that from 2024 vehicles containing battery parts from 'a foreign entity of concern' will be excluded from the $7,500 tax credit designed to increase the uptake of EVs by Americans. That, of course, includes China.
During Donald Trump's presidency a 27.5 percent tariff was imposed on all cars imported from China. Compared to the US, Europe has been fairly inviting to Chinese manufacturers with tariffs of just 10 percent.
'The US market isn't under our current consideration,' Li told Bloomberg. 'I strongly believe that the IRA may slow down EV adoption in the US.'
In 2021, during a tour of a Ford plant in Michigan where the company began producing its electric F-150 lightning pickup, President Biden told reporters: 'The American auto industry is at a crossroads.'
'The real question is whether we'll lead or we'll fall behind in the race to the future, or whether we'll build these vehicles, and the batteries that go in them, here in the United States or rely on other countries,' he said. 'Right now, China is leading in this race, make no bones about it. It's a fact.'
Chinese EV manufacturers now have an excess auto capacity of about 10 million vehicles a year, Bill Russo, CEO of Shanghai advisory firm Automobility told Reuters this month. That is around two-thirds of all North American output in 2022.
BYD, by far the biggest of the pack, makes a handful of cars including the Yangwang U8 luxury SUV.
The plug-in hybrid makes 1,184 horsepower and will sell for around $140,000 in Europe. Its flagship sedan, Han, will start at $75,000.
William Li, CEO of Chinese EV company Nio, told The Financial Times in July that the US should be more friendly to Chinese industry.
'The world should be more open and stop politicizing business,' he said.
In April, he estimated his company and Chinese peers had a cost advantage of 20 percent over rivals like Tesla - thanks to China's control of supply chains and raw materials.
Nio manufactures the ES7, a 5-seat mid-size luxury SUV, which is due to go on sale in Europe for between $70,000 and $81,000.
MG, once a British sports car brand, has been owned and operated by Chinese company Geely since 2005. In the first half of the year it had the second highest market share increase in Europe.
'The big thing, which accounts for around 80 percent of the Chinese brands' sales in Europe, is MG,' Felipe Muñoz, a senior analyst at consultancy JATO Dynamics, told MIT Technology Review.
'MG is changing the EV game with the MG4 and MG ZS EV,' he said. 'Those cars are really competitive, especially the MG4, which is already outselling cars like the Volkswagen ID3.'
The MG4 starts at $30,000 in Europe, while the ID3 is more than $42,000.
For now, it is uncertain if, when, and how Chinese EVs will enter the North American market. Much will hinge on US policy moving forward.
Biden's attempts to pave the way for American auto makers has not been without controversy, and in June culminated in in-fighting between two of Detroit's three largest firms.
In 2011 Elon Musk dismissed the threat posed to Tesla by the Chinese electric car maker BYD. This year it overtook Tesla to become the largest manufacturer of EVs in the world
Ford has long had plans to work with Chinese battery-maker Contemporary Amperex Technology, which is the largest in the world. To do so it proposes a plant in Michigan in which to manufacture batteries.
Its leadership has therefore lobbied for more flexible interpretation of the 'foreign entity' rule which would prevent buyers from enjoying the $7,500 credit.
General Motors executives have called instead for a strict interpretation of the 'foreign entity of concern' rule to prevent such partnerships with Chinese firms.
'This is not about GM vs. Ford,' a GM spokeswoman told The Wall Street Journal. Instead, they said, it's about adherence to the Inflation Reduction Act.
Issues faced by the Chinese EV makers are far from over, and politicians in the European Union are increasingly turning up the heat there too.
Just this month, the European Commission launched an investigation into whether to impose punitive tariffs that would protect EU producers against cheaper Chinese EV imports.
'Global markets are now flooded with cheaper electric cars. And their price is kept artificially low by huge state subsidies,' European Commission President Ursula von der Leyen said.
Ensuring those cars can survive in the European market will likely be the main priority of Chinese auto executives for now.
Chinese electric cars are flooding Europe - will they come to America?
When Elon Musk was asked in 2011 whether the Chinese electric car maker BYD posed a threat to Tesla , he laughed. But they are the ones laughing now.
