Front Burner - Why you can’t buy a cheap Chinese electric car

Episode Date: June 19, 2024

 If price is one of your top reasons for why you haven’t bought an electric car, China is looking to solve that problem. Chinese consumers can buy high quality electric cars for as little as $10 -thousand USD and Chinese carmakers are looking to expand their reach globally.But American and European governments are hoping to put a stop to it with high tariffs to give local manufacturers a fighting chance. But is it too late?Steve LeVine, the author of The Powerhouse: America, China and The Great Battery War and editor of the Electric, joins us to talk about why China’s electric vehicle market is booming and what that could mean for western automakers.For transcripts of this series, please visit: https://www.cbc.ca/radio/frontburner/transcripts

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hi, I'm Jamie Poisson. So if I told you right now there is a person just like you in China who can buy a high quality electric car for about 10 grand U.S. And on top of that, that the company making those cars have global ambitions to sell good, cheap cars to more people. I'm guessing that you're going to think that that sounds like a pretty good idea. Well, you know who thinks that that is a terrible idea? U.S. President Joe Biden

and the big American automakers. Last month, Biden slapped a 100% tariff on Chinese electric vehicles. Tuesday, he tweeted, the future of electric vehicles will be made in America by union workers. Europe has cracked down in similar ways. So how has China become so huge on EVs? Why is the West looking to shut them out? And will it work? I'm joined by Steve Levine, the author of The Powerhouse, America, China, and the Great Battery War, and editor of The Electric, which you can find on the U.S. tech publication, The Information. Steve, hey, thanks so much for coming on to FrontBurner. Thanks, Jamie. Glad to be here. It's great to have you. So Chinese EVs are really having a moment. And tell me why that is.

So there's a couple of reasons. You named one of them, and that's that they've got price points across the spectrum from very, very low to very expensive. You didn't say so, but there is a Chinese electric car that goes for $230,000 as well. Wow. Yeah, they're selling that one. That's BYD. They're selling it in Switzerland. I guess that's a good place for that. The main thing is Chinese car makers have been at this for a lot longer since 2009, 2010, getting ready for this moment. A lot of cars, a lot of price points. And in addition to that quality, they started out, you know, you would get in and you wouldn't want to sit in the car for very long because you would fear it was going to fall apart. But the quality now is very, very good. These are the reasons. You know, you hear people talk about how the industry there is heavily subsidized by the Chinese government, and that's why they have been able to get such momentum. And do you have a sense of the extent to which that's true?

Yes, I do, in fact. So it is true that the industry, from soup to nuts, you know, from mining minerals all the way through all of the components to the cars themselves and the batteries have been supported by the state to different degrees throughout all this period, including for consumers, tax credits and also things like you don't need to pay a license plate fee, you know, which can be very expensive in the cities. You can drive in free lanes. You're not stuck in traffic. So those still exist. But the way that I look at it is that a lot of those subsidies have been lifted or reduced in recent years. And the West is fond in all of these cases where Chinese companies move in on an industry of blaming it on subsidies and product dumping. But in this case, you've got to sell the car. People are buying these cars

because they're good cars. This 27-year-old is about to buy his first sedan. He's going for an EV, but not necessarily for environmental reasons. I don't have a particular preference between electric or petrol cars. It's just that now, for the same price, EVs offer a much better user experience. So the Chinese really have upped their game. They are the best, some of the best, because, you know, we do have Tesla after all. But, you know, among the best EVs in the world. And just tell me more about why, why they're among the best EVs in the world. And just tell me more about why, why they're among the best EVs in the world. What makes them so good? And also, like, why are they cheaper than the EVs that we're seeing here?

Like, how is that possible? The quality and the price come down to the same, mostly the same reason. And it's because of brutal competition. So a few years ago, and I'm thinking about 2019, there were about 500 Chinese EV companies. I don't know how many we have in the U.S. and Europe. Let's say 15, 10 or 15 companies. Definitely not 100. But now there are 100. That means that that competition, the Chinese competition, winnowed out 80% of the companies. And they fight like crazy uh to sell to the

public uh the public chinese public does have a choice and and and so the vehicles got better the quality got got better and also chinese buyers are tech maniacs and so uh and so whereas we might look and do look right at the styling and you know know, we're absolutely fixated on fast charging, which we should be, but they are fixated on gizmos. Every kind of tech you can think of and probably can't think of are in that car. Give me an example. think of are in that car. Give me an example. Well, karaoke. It's absolutely a standard feature in these EVs. Darling, darling, stand by me. It's not your usual road trip. It's big business for companies like Xpeng, Nio, and Liado, who are at the forefront of this trend, besting Western rivals by offering models with karaoke microphones. Why would you want to be in your EV and you can't sing?

Why not? One thing I wanted to, that your listeners ought to know, it is true that the BYD Seagull, when people are talking about the $9,000 car, they're talking that the BYD Seagull, when people are talking about the $9,000 car, they're talking about the BYD Seagull. That's what it costs in China. When they sell it abroad, it's $21,000. So what they're doing, what the Chinese are doing is they do have this brutal competition at home, cut rate prices when they go abroad, they're doubling and in some cases, cut rate prices when they go abroad, they're doubling and in some cases, tripling the prices that they're selling. And that's why they're not making any money at home, but they do make money when they go abroad. So let's talk about their attempts to expand.

You know, you mentioned how they're selling the car, one of the cars for $21,000 abroad. You know, where are they selling? How is it going? You know, are people able to easily access these vehicles? And if not, why not? This is part of the China playbook, industry by industry. They build up through this kind of feverish expansion of new industries, and they end up with enormous overcapacity twice, three times. In the case of EV, six times

as much production capacity as they need for the local market. So then they push out into the export market. That's what we're seeing now is that stage. It started last year. So you're seeing Chinese-made EVs in Israel, in Southeast Asia, some in South America. For example, the $21,000 car I told you about, that's Brazil and Mexico. And some, we're hearing a lot about the Europeans being paranoid about a Chinese flood. One out of two Chinese car exports is already sold in Europe.

And with this sudden rise, the EU is worried about unfair commercial practices. Global markets are now flooded with cheaper Chinese electric cars. And their price is kept artificially low by huge state subsidies. This is distorting our market. It hasn't really started yet. Really, they've only sold, you know, all the Chinese companies. Maybe there are five or six that are attempting to sell in Europe. It's a few thousand models per year at this stage, but they want to sell a lot more. So they've put Europe on alert, setting up showrooms everywhere. It's a bit of a cart and horse or chicken and egg, pick your metaphor, situation. The price that Xpeng, NIO, BYD, the companies that are selling in Europe, they're not cheap yet.

the companies that are selling in Europe, they're not cheap yet, right? So do you want to pay 40,000 euros or 50,000 euros, 60,000 euros for your EV? It's not these cut rate prices that we hear about in China at this stage. And then, and then you might ask, and I've asked, well, why not? You're right. Yeah. Why is that? Okay. The short answer is we don't know why, but we're, but there, Why is that? Okay, the short answer is we don't know why, but there's conjecture out there. One is they want to earn as much as they can. They're doing price discovery. resistance to their brands prematurely by undercutting the local brands too much. What's Volkswagen, BMW, Mercedes, Renault, what are they all going to say if the Chinese companies come in at half the price of an equivalent EV model?

That seems to make sense. And not to ask too obvious a question, but, you know, what could happen if there was like a lot of resistance? I guess there could be what, bans on these cars or very high tariffs on the cars? Like what could happen? Yeah. over the last 10 days or so, have imposed pretty high tariffs on the Chinese cars, depending who you are. So the EU investigated Chinese subsidies,

and then they imposed a strata of tariffs on the companies, depending whether you cooperated with the investigation. pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. Hi, it's Ramit Sethi here. You may have seen my money show on Netflix. I've been talking about money for 20 years. I've talked to millions of people and I have some startling numbers to share with you. Did you know that of the people I speak to, 50% of them do not know their own household income? That's not a typo. 50%.

That's because money is confusing. In my new book and podcast, Money for Couples, I help you and your partner create a financial vision together. To listen to this podcast, just search for Money for Cops. What is happening in the United States? How is the U.S., which of course also has a car industry and, you know, companies like Tesla, how are they responding to this? These Chinese vehicles are effectively banned in the United States. They're not really banned, but the politics in the United States is hostile. The Chinese companies feel that, and so they're not selling them in the United States. So you can buy two kinds of Chinese-owned

models in the United States, but no one knows they're Chinese. Volvo and Polestar. So those are both owned by Geely, the Chinese car company. And, you know, they sell pretty well. The way things stand, no one expects anytime soon there to be like a European situation

for Chinese owned vehicles in vehicle companies in the United States. They will, however, you know, some somehow they'll come in through Mexico. They'll come over from from Europe. BYD will rebrand itself. But don't look for electric cars from BYD on American roads anytime soon. U.S. government need to be more friendly. Stella Lee is the CEO steering BYD's expansion in the Americas. She said the U.S. is not part of the plan yet. They're not ready. But then for BYD, we are ready.

They will get into the United States to but to the degree that they do not. I think it bodes really, really badly and. Ominously for the U.S. companies, Ford, GM, GM and Ford. Have a history of ignoring foreign competition and their quality has suffered because of that. They're not as competitive as they could be. And I guess when you talk about a history of this, maybe that's, like, were we talking about the 70s and 80s, right? Like, when the Japanese car industry really started booming and, you know, you saw this kind of these the similar pushback from the North American manufacturers. Yeah, it's a hangover. Yeah, there's a hangover. We have we have a prejudice.

You do and I do probably some of our friends, our parents. Right. About American cars, about their quality. They may be a lot better, but we don't think so. And we want to be sure. So we're buying German and Japanese cars. So this could happen with the Chinese cars, too. You've got to have the competition. You've got to meet the competition.

Ford and GM have already transformed themselves from international companies to mostly regional companies. Both of those companies sell most of their vehicles in North America, SUVs and pickup trucks. I just feel like people might be very frustrated hearing this conversation. People who just are interested in getting an electric car. It's better for the environment. They would like to be able to buy one that's relatively reasonably priced. priced. And like you're telling us that there are all these great Chinese EVs for, you know, very good prices and we can't get anything like that. Yeah, you're right. It's true. And really, when you think about the, you know, the cars that at this, we're at the very front end of this. And

so there aren't a lot of available models in the coming like two years next year 2025 and 2026 you're going to see a lot more of them but as it stands we're not seeing a lot of them the ones that are the best hyundai gets very good marks right south south korean company and and those are available. Volvo and Tesla. I actually had a question to try and wrap up this conversation at some point about Tesla, because there is this there is this sense, right, that the company's kind of been in a slump for a while. But, you know, how does it fit into this whole equation? All right. So the number one selling car of any kind, any kind in the world last year and possibly this year too, is the Tesla Model Y. So it's an out-of-this-world, wildly selling vehicle. It also is four years old.

It came out in 2020, the first model. The lineup, the Tesla lineup is stale, you know, fantastic cars a few years ago and starting to run behind the Chinese models. And recently, as you know, Elon Musk, the CEO, announced, I'm not going to make the $25,000 car. Tesla appears to have axed plans for a cheaper model that was set to cost around $25,000. That tallies with earlier Reuters reports that boss Elon Musk had cancelled the all-new Model 2. At the time, he posted on X that Reuters is lying, but failed to point out... I'm worried about Tesla also. And so, you know, they started out gangbusters, but Musk has kind of made a pivot. I want to make humanoid robots. And, right, and I, you know,

I want to be a big AI company and I want to equalize free speech, depending how you want to view that, be totally outspoken. And he's become less interested in EVs. And so they could slide out of – Tesla could easily slide out of relevance. Well, I think this question might be a good one to end on. I know that it's something you've hit on a few times during this conversation, but, you know, take me down the line a little bit, five years, even 10 years, just for somebody living in North America and Canada or in the United States, like what is the landscape going to look like? Like, you know, is it going to be very easy for me to buy an EV?

What kind of EV? You know, how much money am I looking at? Like, what is this going to be like? Okay. Okay. I'm glad to do this. Or am I just going to buy another gas powered car? Yeah.

No, no. That's exactly how you should be thinking. So the caveat here, this is total conjecture. Do not come back to me in 2034 and say, Steve, you are completely wrong. All right, so I think that the tail for combustion, pure combustion, is much longer than we think. It doesn't end in 2030 or 2035. It goes on longer than that. And it goes on in the form of the pure models, but also in the form of hybrids and plug-in hybrids. So thinking five years and 10 years from now, people do people are buying. And in fact, most people want to buy those kinds of cars because they want to they want to save gasoline. But also kind of a stigma, a social stigma arises about burning fuel, only fuel and not and not having any energy saving device in your car. And I do think we have Chinese EVs everywhere, uh, that, that we, that it becomes normalized. And I also think that,

um, one or more, maybe more of the major car companies no longer exists. So, you know, do you think it's fair for me to say, you know, with the caveat that, of course, you don't have a crystal ball, that in this kind of global fight for the future of this, you know, really important technology, China wins? China has won the 2020s for sure. The fight we're fighting now is for the 2030s and beyond. And you might be right. I'm not prepared to wave the white flag yet,

but they may have won for sure the first half of the 2030s. The second half of the 2030s, they're contested. All right. Steve, this is great and super interesting. I learned a lot. Thank you so much. Thanks, Jamie. All right, that's all for today.

I'm Jamie Poisson. Thanks so much for listening. Talk to you tomorrow. For more CBC Podcasts, go to cbc.ca slash podcasts.