On Wednesday last week the Wall Street Journal reported that although delivery of California’s US$1 billion order for N95 masks had been delayed twice because of the failure of the manufacturer — major Chinese electric vehicle maker BYD — to obtain certification from the US National Institute for Occupational Safety and Health, the state was unable to find an alternative source in the short term, and had no choice but to extend the procurement contract again. Then, on Monday, California Governor Gavin Newsom’s office announced that the institute had finally approved BYD’s N95 masks and delivery could go ahead.
Several major Chinese factories have expanded into the field of mask manufacturing following the COVID-19 outbreak. BYD decided at the end of January to switch to mask manufacturing and by the end of April its daily output had climbed to 20 million. China’s People’s Daily ran a full-page report about how the automaker had transformed itself into the world’s biggest mask manufacturer in just three months.
However, BYD’s repeated failure to obtain US federal certification for its N95 masks has revealed the tarnished halo of the “Made in China 2025” strategic plan.
As the “world’s factory,” China has advantages in terms of product range, quantity, speed and price, but quality has always been its weak point. On May 7, the US Food and Drug Administration canceled the import licenses of more than 60 Chinese N95 respirator manufacturers because their products failed to filter out 95 percent of airborne particles, as required by US standards, with one company’s masks filtering 35 percent or less.
This is a typical example of the poor quality of Chinese-made products. It is an unfortunate result of the decades-old trend of global supply chains opting for low manufacturing costs, despite quality concerns. COVID-19 has sounded the alarm about putting all one’s eggs in the China basket. It has prompted rising calls for more regional manufacturing instead of ordering everything from China. Nearly 90 percent of respondents in a recent Australian opinion poll said that more products should be made domestically to reduce the nation’s reliance on China.
The delays that beset California’s mask order have implications for BYD’s prospects in the US. In October 2017, BYD established an electric bus factory in the southern Californian city of Lancaster that can turn out 1,500 vehicles per year. As the biggest such factory in North America and BYD’s biggest production base outside China, the plant demonstrates BYD’s keen ambition to make inroads into the US market.
On Dec. 20 last year, US President Donald Trump signed the National Defense Authorization Act for Fiscal Year 2020, which bars the use of federal funds to buy buses from China. This ban marked a major setback for BYD’s American dream. However, the company lobbied strenuously against the ban, and early last month, the US Federal Transit Administration issued a clarification which said the ban does not apply to contracts awarded within a two-year sunset period.
As the number of confirmed COVID-19 cases in California has exceeded 100,000, face mask certification might decide the success or failure of BYD’s entry into the US market via its California plant. However, while BYD is a benchmark company for China’s development into a world manufacturing power, the repeated delays in its mask deliveries, alongside the volatile atmosphere of the new US-China Cold War, forebode troubled prospects for BYD’s California electric bus factory.
Chen Yung-chang is manager of a private company.
Translated by Julian Clegg
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