China-based electric vehicle (EV) maker BYD Co sold more than 526,000 vehicles in the fourth quarter of last year, outperforming global EV leader Tesla Inc’s about 485,000 vehicles. Instead of celebrating BYD overtaking Tesla to top the EV sales, the Chinese Communist Party’s (CCP) mouthpiece Global Times published an editorial criticizing the Western theory of the Chinese EV threat.
It is reminiscent of the “Sputnik crisis” in 1957, when the USSR achieved the first successful satellite launch, starting the space race between it and the US. With the attention and support of the US public and government, the US eventually won out by landing the first crewed mission on the moon.
BYD overtaking Tesla has awakened the already wary US and the EU.
Under the banner of net zero carbon emissions and environmental protection, Europe once embraced China’s low-priced EVs, which were 30 to 40 percent cheaper than the local average.
In September last year, European Commission President Ursula von der Leyen announced an investigation into subsidized EVs from China, stressing the painful experience of the European solar industry being completely crushed by China.
Two months later, Von der Leyen publicly complained that Beijing had heavily subsidized the EV industry, allowing cheap Chinese-made vehicles to be dumped in the European market.
The administration of US President Joe Biden is considering raising import tariffs on Chinese EVs and EV battery packs to support the US’ domestic new energy industry and compete with low-priced products from China.
According to statistics from the International Energy Agency, eight out of every 10 solar panels in the world are made in China. Chinese manufacturers continue to blindly compete for the solar photovoltaics investment bubble. It is expected that after next year, global solar panel production and supply are to be entirely monopolized by China. The vicious cycle of severe oversupply has led to price collapse and low profits, killing the European and US solar industries.
The US and the EU are in a dilemma. By embracing clean, renewable energy they effectively left their door wide open to Chinese manufacturing facilities and equipment. China’s EV manufacturing intends to copy the rise of the solar industry. Despite problems such as overcapacity and uneven quality, economies of scale and a complete supply chain still enable China to launch world-class products. Even if it cannot dominate the global market, it could at least capture a certain share. As most of the key battery supply chains are in the hands of Beijing, the US and the EU have no choice but to introduce subsidies and strive to catch up in the research, development and promotion of new energy vehicles.
The US and the EU, burdened by climate change, have come to realize that forcing the elimination and transformation of traditional vehicles could instead give Chinese-made EVs an opportunity to grow rapidly, impacting the traditional European vehicle manufacturing industry, at the potential cost of tens of thousands of jobs. The US and EU are facing reality and slowing down the transformation.
It is not too late for the EU and the US to change course. In mid-December last year, Germany completely canceled its car purchase subsidies, and France also revised its car purchase incentive regulations in favor of French and European products. Meanwhile, according to the US Inflation Reduction Act, EVs containing battery components made or assembled in China are excluded from duty-free discount, starting from Jan. 1.
Chen Yung-chang is a company manager.
Translated by Lin Lee-kai
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