Two days ago, Robinson Meyer wrote about Chinese electric cars in the New York Times, and he had a warning. The Big Three American automakers are about to get destroyed. And he made a compelling case, beginning with the arrival of Chinese carmaker BYD’s new “plug-in hybrid that gets decent all-electric range and will retail for just over $11,000.” Detroit can’t compete with that.
Perhaps the Big Three deserve destruction; after all, they hooked us on S.U.V.s in the first place and then fell behind in the E.V. race. But letting them die is not a tenable political option for the Biden administration. One goal of Mr. Biden’s presidency is to show not only that decarbonization can work for the American economy but also that it can revive moribund fossil-fuel-dependent communities in the Rust Belt. Mr. Biden has also fought for and won the endorsement of the United Auto Workers, which just cemented a generous new contract with the Big Three and now needs them to thrive.
He has reason, in other words, to help the Big Three even before you get to the harsh electoral realities: The legacy auto industry employs more people in Michigan than in any other state, and Mr. Biden’s path to re-election all but requires him to win Michigan in November.
Meyer also put production numbers in perspective. Chinese automakers are building factories like crazy.
[BYD] sold three million electrified vehicles last year, more than any other company, and it now has enough production capacity in China to manufacture four million cars a year. But that isn’t enough: It’s building factories in Brazil, Thailand, Hungary and Uzbekistan, to produce even more cars, and it may soon add Indonesia and Mexico to that list. A deluge of electric vehicles is coming.
This is all happening too fast for the Big Three.
Ford’s and GM’s earnings rest primarily on selling pickup trucks, S.U.V.s and crossovers to affluent North Americans.
In other words, if Americans’ appetite for trucks and S.U.V.s falters, then Ford and GM will be in real trouble. That creates a strategic quandary for them. In the coming years, these companies must cross a bridge from one business model to another: They must use their robust truck and S.U.V. earnings to subsidize their growing electric vehicle business and learn how to make E.V.s profitably. If they can make it across this bridge quickly, they will survive. But if their S.U.V. profits crumble before their E.V. business is ready, they will fall into the chasm and perish.
That’s why the flood of cheap Chinese electric vehicles poses such a big problem: It could wash away Ford and GM’s bridge before they have finished building it. Even a wave of competitive electric cars from the Sun Belt automakers — like Kia’s EV9, a three-row S.U.V. — could eat away at their S.U.V. profits before they’re ready.
So, it looks like some kind of delaying tactic is required, right? But will that be enough?
Mr. Biden will need to impose trade restrictions. But here’s where it gets messy. The case for protecting the American auto market from Chinese E.V.s is obvious and politically essential but also highly troublesome. In the short term, American automakers — even the homegrown electric-only carmakers like Tesla and Rivian — must be shielded from a wave of cheap cars. But in the long term, Mr. Biden must be careful not to cordon off the American car market from the rest of the world, turning the United States into an automotive backwater of bloated, expensive, gas-guzzling vehicles. The Chinese carmakers are the first real competition that the global car industry has faced in decades, and American companies must be exposed to some of that threat, for their own good. That means they must feel the chill of death on their necks and be forced to rise and face this challenge.
But, for now, the Biden administration has pulled a rabbit out of a hat. In a White House statement released on Thursday, the administration declared Chinese vehicles a “risk to our national security.” This is primarily because cars are now smart cars, exactly like phones are now smart phones, and so buying and using a Chinese car is just like giving the Chinese government the passcode to your phone.
Most cars these days are “connected” – they are like smart phones on wheels. These cars are connected to our phones, to navigation systems, to critical infrastructure, and to the companies that made them. Connected vehicles from China could collect sensitive data about our citizens and our infrastructure and send this data back to the People’s Republic of China. These vehicles could be remotely accessed or disabled.
China imposes restrictions on American autos and other foreign autos operating in China. Why should connected vehicles from China be allowed to operate in our country without safeguards?
So today, I am announcing unprecedented actions to ensure that cars on U.S. roads from countries of concern like China do not undermine our national security. I have directed my Secretary of Commerce to conduct an investigation into connected vehicles with technology from countries of concern and to take action to respond to the risks.
As President I vowed to do right by auto workers and middle-class families that depend on the auto industry for jobs. With this and other actions, we’re going to make sure the future of the auto industry will be made here in America with American workers.
I bet you did not see that coming!
So, Biden is making sure the union autoworkers in the Midwest know he’s got their backs. But is this going to help at all when it comes to competing internationally? Is it perhaps going to hurt by preventing the Big Three from feeling “the chill of death on their necks”?
