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China has become a powerhouse in electric vehicles. Its automaker BYD<\/a> recently topped Tesla<\/a> in global EV sales, with Elon Musk warning<\/a> of Chinese carmakers, \u201cIf there are no trade barriers established, they will pretty much demolish most other car companies in the world. They\u2019re extremely good.\u201d<\/p>\n On Friday, the Alliance for American Manufacturing sounded the alarm, issuing a report<\/a> entitled: \u201cOn a Collision Course: China\u2019s Existential Threat to America\u2019s Auto Industry and its Route Through Mexico.\u201d\u00a0<\/p>\n The report, which lists policy recommendations to combat overcapacity and unfair trade practices, notes that BYD is building factories in Thailand and Hungary designed to be regional export hubs. It then adds:\u00a0<\/p>\n \u201cMore alarming, however, are Chinese firms\u2019 heavy spending on plants in Mexico, through which they can access the United States by way of the more favorable tariffs under the United States-Mexico-Canada Agreement (USMCA). This strategy is, in effect, an effort to gain backdoor access to American consumers by circumventing existing policies that are keeping China\u2019s autos out of the U.S. market.\u201d<\/p>\n In the U.S., made-in-China EVs are currently subject to a 25% tariff, which goes atop a 2.5% tariff on imported cars. That\u2019s prevented them from making significant inroads. Manufacturing in Mexico, however, could change the equation<\/a>.<\/p>\n House lawmakers recently warned about<\/a> China\u2019s \u201cindustrial strategy to dominate the global automobile market\u201d and its EV makers \u201cgaining a back door to the U.S. market through our key trading partners.\u201d Calling for existing tariffs on made-in-China cars to be maintained or even increased, they described a \u201ccoming wave\u201d of Chinese vehicles that \u201cwill be exported from our other trading partners, such as Mexico.\u201d\u00a0<\/p>\n The Financial Times<\/em> recently reported<\/a> that Chinese carmakers including MG, BYD, and Chery have been scouting for manufacturing locations within Mexico. Meanwhile imports of Chinese cars into Mexico have been surging<\/a>.<\/p>\n While Musk credits<\/a> Chinese EV makers for being \u201cextremely good,\u201d the Alliance for American Manufacturing focuses more on the government support they receive, writing:<\/p>\n \u201cBackstopped by heavy state support, Chinese automakers and suppliers have grown into industrial powerhouses that control the nodes of production for virtually the entire electric vehicle value chain.\u201d\u00a0<\/p>\n BYD, backed by Warren Buffett\u2019s Berkshire Hathaway<\/a>, keeps its costs low partly by owning the entire supply chain of its EV batteries\u2014significant since a battery accounts for roughly 40% of an electric vehicle\u2019s price.<\/p>\n \u201cNo one can match BYD on price. Period,\u201d Michael Dunne, CEO of Asia-focused car consultancy Dunne Insights, recently told<\/a> the Financial Times<\/em>. \u201cBoardrooms in America, Europe, Korea, and Japan are in a state of shock.\u201d<\/p>\n Ford CEO Jim Farley recently said that, to address the Chinese threat, he\u2019s open to cooperating with rivals<\/a> on battery production. His GM counterpart Mary Barra made similar comments<\/a>.<\/p>\n That threat, according to the Alliance for American Manufacturing, is scarier than many people realize. It writes:<\/p>\n \u201cThe introduction of cheap Chinese autos\u2014which are so inexpensive because they are backed with the power and funding of the Chinese government\u2014to the American market could end up being an extinction-level event for the U.S. auto sector.\u201d<\/p>\n<\/div>\n\nA \u2018coming wave\u2019 of Chinese EVs<\/h2>\n
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