NICK POPE
CONTRIBUTOR
American automakers will need to make major changes to their businesses if they want to remain competitive with Chinese electric vehicles (EVs) poised to flood the global market, according to analysis published by auto industry consultants.
U.S. manufacturers currently do tens of billions of dollars of business abroad, but Chinese competitors are poised to take over approximately one-third of the global market share by 2030 with particularly strong growth in Europe, South America and Asia driven by EVs and plug-in hybrids, AlixPartners projects in its report.
The auto market is evolving to favor EVs thanks in part to the policy choices of the Biden administration and other Western governments, and the consultancy concludes that American firms need to change course from “business-as-usual” practices if they do not wish to be left behind.
“The global auto industry has been shaped by several inflection points over the past half-century, including the emergence of Japanese production techniques in the 1970s, then the rise of the Koreans, and the more recent disruption caused by Tesla,” Mark Wakefield, global co-leader of the automotive and industrial practice at AlixPartners, said of the analysis. “China is the industry’s new disruptor – capable of creating must-have vehicles that are faster to market, cheaper to buy, advanced on tech and design, and more efficient to build. For traditional [manufacturers], keeping pace with China’s strongest brands will require more than a course correction.” (RELATED: ‘Existential Problem’: US Auto Titans On Edge As Cheap Chinese Electric Vehicles Rev Up Competition)
Specific advantages for Chinese manufacturers include a 35% production cost advantage that allow flexibility to blunt the impacts of tariffs, a faster design cycle and a focus on providing drivers with advanced technology features that enhance the user experience, among others, according to AlixPartners’ report. These advantages cumulatively give Chinese automakers a leg up on American competitors in the evolving market.
BYD, China’s biggest auto manufacturer, already started examining options to penetrate the American market via Mexico, and critics of the Biden administration’s EV push have consistently expressed concern that the approach could end up backfiring by empowering Chinese production capable of undercutting the American industry’s biggest players. The administration is concerned about Chinese firms’ ability to do so, as well as unfair trade practices, leading the federal government to impose or strengthen tariffs against EVs, EV batteries and other related products in May.
The Biden administration has finalized a handful of stringent regulations for light-, medium- and heavy-duty vehicles in recent months, including a rule that will require manufacturers to ensure that EVs make up 56% of new sales by 2032, with an additional 13% of sales being plug-in hybrids by the same year. Additionally, the administration is spending billions of dollars to advance EV adoption, production and infrastructure, but major American firms are losing considerable sums of money on their electric product lines while consumer demand does not appear to be taking off at the rate proponents may have expected.
“Automakers expecting to continue operating under business-as-usual principles are in for more than just a rude awakening – they are headed for obsolescence,” Andrew Bergbaum, global co-leader of the automotive and industrial practice at AlixPartners, said. “The revolution taking place in the global auto industry is driven by the incredible and once unthinkable maturation of Chinese automakers that do a number of things differently.”
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The recommendations are to adapt to policy. Those policies are very likely to change six months from now. Proceed with caution.
American auto manufacturers are not finding demand for the EVs their building now. They should base their manufacturing on market demands, not mandates.
What manufacturers want most is certainty. Team Biden want to force their preferences on everyone and each mandate and regulation is more outrageous than the last.
The only auto manufacturers “headed for obsolescence” are going to be those who abandon cars people actually want (gas, diesel or mild hybrid) for cars very few want (EVs and plug-in hybrids).
56% of SALES by 2032?! They’ll be lucky if it’s 5.6%. Virtually nobody wants this crap.
I agree with it all, but I also used Windows 3.1
AlixPartners is making some big assumptions about the US auto market. First, that EVs will take over from ICEVs even while consumers do not want EVs. If Trump is elected EVs will go the way of the Dodo except for Teslas. Even if Biden manages to hold on, he will be forced by the courts to give up his mandates. Second, Chinese automakers can’t build vehicles that Americans want and that meet all US standards while keeping their cost structure. There is a reason that their vehicles are cheap and have short product cycles. They do not meet US standards and their quality is dismal. Reports from China about their vehicles are not favorable. Third, the US market is heavy on SUVs and trucks which are not as easy to build as cars. Even the Japanese have not been able to master the truck market.
“If Trump is elected EVs will go the way of the Dodo” Careful that’s testable.
“which are not as easy to build as cars” Are you sure that’s why “the US market is heavy on SUVs and trucks“?
That is not why the market is heavy on SUVs and trucks but it is what currently gives the traditional US automakers most of their profit due to their knowledge of the products.
“The Chicken Tax is a 25% tariff on light trucks imported to the U.S. The United States imposed the tariff in 1964 through an executive order issued by President Lyndon Johnson, in retaliation against European tariffs on American chicken imports.“
Sales volume according to Edmunds:
1. Ford F-Series
2. Chevrolet Silverado
3. Toyota RAV4
4. Tesla Model Y
5. Honda CR-V
6. Ram 1500/2500/3500
7. GMC Sierra
8. Toyota Camry
9. Toyota Tacoma
10. Tesla Model 3
Only Tesla looks out of place in the rankings based on my commute.
According to Heritage: “Subsidies and regulatory credits amount to almost $50,000 per EV over a decade.” Helps me make sense of Tesla models at 4 and 10.
But “due to their knowledge of” should only be followed by “the products” if the term “products” is used as a euphemism for tax and tariff policies.
Toyota and Nissan have not cracked the truck market because of product, not price.
That too was korean cars about 10-15 years ago
The Koreans have about a 10% share after 36 years. Their product is much better than the Chinese vehicles, although they have had problems in the last few years with fires other product issues.
“The revolution taking place in the global auto industry is ..” a return to ICE vehicles following a brief foray into EVs. It’s hard to see EV mandates being continued and EV infrastructure getting implemented in the USA over the next 4 years if Donald Trump wins, and without the mandates and infrastructure it is hard to see many EVs being bought.
If it happens without government force, a revolution is progressive.
If it needs a 1920s political movement to force 1910s electric buggies on us, it’s Progressive — the political wheel spins ever backwards, because the glorious Socialist future is found in an imaginary Natural past.
The USA biochemists should, with all haste, come up with a clean(er) derivative of gasoline which produce far less noxious gases and then start selling ICE vehicles with a new system and carburettor totally sidelining EVs and let China keep on building them!
Yes, there is a universe just 3 parsecs away, sideways to every other direction, where that works.
Unfortunately politicians here oppose anything that weakens their power or control and they have such big enforcement hammers on standby.
Fun new conspiracy theory:
Is the simultaneous push for EVs and destruction of electrical energy reliability a way to make every citizen with a car help pay for electricity to run AI?
As I’ve been saying since the beginning of articles about the industrial needs for large amounts of steady power, the new better power services will be cornered by such facilities as chip manufactures, data centers, cloud storage centers and AI centers. The peons will be left with wind and solar, when it is available, and nothing when it isn’t. It has begun already.
The plug can be pulled on EVs really fast if the government stopped subsidizing the build-out of charging stations. Construction is already glacially slow. Pull government money and it will grind to a stop.
I put no stock in this article. The authors write as though we live in a static world not the dynamic world we actually inhabit. Granted our current leaders are proposing some incredibly ignorant policies. Leaders in the past have done similar things, that doesn’t mean we follow crappy leaders off a cliff.
For one thing there won’t be a Biden administration after Nov. 5 , so those new quotas for EVs and hybrids won’t have to be met. Secondly, what makes anyone believe that North Americans and Europeans, among others are ready and willing to switch to EVs when there’s been a sharp slump in sales and equally sharp production cutbacks. There might be some Chinese market penetration, but Americans and Canadians have become somewhat addicted to large cars, partially because of their increasing girth, so only small inexpensive models are likely to succeed and in limited numbers providing that their reliability levels are good.
Once again the solution is Trump 2024. He will apply a huge tariff on Chinese cars imported from China or Chinese cars imported from Mexico. He will also stop any plans to mandate EVs. Under Trump you could buy an EV if you want one but you won’t be forced to buy one.
Sounds lie the auto industry could be in for a bloodbath.
I will probably have to replace my 10 year old petrol Nissan Qashqai in the next couple of years. I would be quite happy to replace like for like, but unfortunately the Nissan promotional literature seems to suggest that only BEV or hybrid models are available. Some are saying that a non-plugin hybrid is a reosonable compromise, but I am not keen for two reasons. First, manufacturers of all things love Li-ion batteries as they put a finite life on the product. Your grandfather’s gold pocketwatch may still work, but your laptop or electric toothbrush will be in landfill 5-10 years from now. Secondly, the fire risk – see this:
https://www.youtube.com/watch?v=-Q1_9HSyx78
I have seen a report that EV fans love to quote that suggests that ICE cars are two orders of magnitude more likely to catch fire than BEVs, but I am very suspicious of this data. First of all, most care fires are due to arson, morons steal cars to go joyriding then torch them to destroy evidence. Most ICE vehicle spontaneous fires are due to surface ignition of oil and grease around the engine and result in repairable damage. If my car were to catch fire, I would prefer that it was in the engine compartment than under the front passenger seat. Li-ion battery fires are usually sudden and intense and will almost always result in total loss. I am still convinced that the Gatwick Airport car park fire was caused by a hybrid, but even if not, any EVs in the car park would have burned intensely, while most of the cars lost would be ICE vehicles, so the stats can be superficially interpreted as more ICE than BEV caught fire.
Chinese takeover “driven by EVs and plug-in hybrids.” Hahahaha
This will be as epic a fail as China’s one-child policy. Could their worst enemy have duped them into cutting their population by 3/4s? They just didn’t realize that Paul Ehrlich was their worst enemy, and today they are still following the Eherlichs of the western left.
I don’t mind this happening to the communists, but I hate to see it happening to the Chinese people, who are wonderful and intelligent and responsible and non-criminal. They do not deserve the eco-communist pestilence any more than we do.
Lord please help Donald Trump to overcome the election stealers and give control of our great nation back to the people, and help all peoples to achieve liberty and honest democracy.