BYD Yuan Plus deliveries in Mexico.

Chinese Electric Cars Cause Fear And Loathing In High Places

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The Chinese are coming!  The Chinese are coming! That’s the refrain that is rocketing around the corridors of power in the UK and the US today. Top Gear, known for its whimsical embrace of everything weird in the world of automobiles, reports that professor Jim Saker, president of the Institute of the Motor Industry, recently issued a warning that Chinese built EVs could be used by Beijing to destabilize the UK economy.

How would that work,exactly? Saker cautioned that hundreds of thousands of EVs could contain spyware allowing them to be immobilized remotely by officials in China, causing British roads to grind to a standstill. He described Chinese EVs as potential “Trojan horses.”

Never shy about exposing the absurd and the ridiculous, Top Gear was quick to remind its readers that those “Trojan horses” would be filled with confused pensioners rather than bloodthirsty Greek soldiers. Then it spun up this delightful scenario based on a James Bond premise:

“When I push this button, Bond, all hell shall be unleashed!”

“Blofeld, you’re a monster. What does it do? Flip Earth’s gravity upside down?”

“Even worse, Bond! It causes a bunch of mid-sized electric hatchbacks to slow gently to a halt!”

Top Gear then asked this pointed question.”If this truly is China’s grand plan to destabilize our nation’s economy, have they visited the southeast of England recently? If a hellbent foreign agent hit the button marked ‘monstrous motorway traffic jams’, would anyone even notice? China, we don’t need a remote EV shutdown to cause terminal congestion on our roads. We’re quite capable of creating total gridlock for ourselves, thank you very much.”

Other industry figures have dismissed Saker’s warnings as ‘hysterical’, pointing out it’s not only Chinese EVs but pretty much every modern car that has the potential to be disabled remotely. Top Gear, tongue firmly in cheek, suggests such reassurances may not be exactly what the British public is seeking when it comes to defending the nation against a flotilla of electric cars that are subject to the whims of Xi Jinping.

Electric Cars South Of The Border, Down Mexico Way

It used to be that America prided itself on building the best products on Earth and selling them to the rest of the world. Globalization pretty much put the kibosh on that, unfortunately. Having learned at the knee of the master, other countries now know how to build first class products and sell them worldwide. When it comes to making electric cars, China is the prime example of how the servant has become the master.

The US is bound and determined to slow the Chinese juggernaut and has enacted a number of rules and regulations designed to put manufacturers in China at a disadvantage when it comes to supplying materials and components for the batteries of electric cars. China supplies about 96 percent of the high purity graphite used to manufacture batteries for electric cars worldwide. It also is able to build electric cars more cheaply than almost any other country. Those are two huge economic advantages and the US government quite rightly is concerned that if Chinese companies are allowed unfettered access to the US market, they will quickly put American manufacturers out of business.

But there is a back door to America. Thanks to the free trade agreements between the US and Mexico, Chinese companies could build factories south of the border to supply the US with lower priced electric cars. In fact, according to the Financial Review, BYD, MG, and Chery are already in conversations with officials in Mexico about building new factories there. It also says an unnamed Chinese company is planning a $12 billion battery factory in Mexico. $12 billion is a whole lot of money, which suggests the unnamed company is CATL, which is anxious to crack the US market but reluctant to build a factory in America due to anti-Chinese hysteria sentiment.

Chinese Cars In Mexico

electric cars MexcioChinese made cars are now 20 percent of new vehicle sales in Mexico. “The interest of Chinese companies in the Mexican market has grown exponentially,” Francisco Bautista of EY Latin America, which is working with four Chinese electric vehicle companies looking to locate production in Mexico, tells Financial Review, which says the Biden administration is concerned that Chinese carmakers could produce technologically advanced models that are more competitively priced in Mexico.

MG, owned by SAIC, plans to build a $2 billion factory in Mexico, while BYD is working on a factory investment worth hundreds of millions in its first phase, said one source familiar with the talks. Last month, BYD met ministers from at least four Mexican states, including Edomex and Yucatán, at a reception in Mexico City according to an unnamed source. The governor of Nuevo León — the northern Mexico state where Tesla plans to build its next factory — said BYD was planning a factory there, although the company said no final decision had been taken.

The US has said it is not trying to block Chinese investments in Mexico, but Treasury Secretary Janet Yellen recently stressed the need to apply trade rules properly, including a recent US agreement with Mexico to strengthen its foreign investment screening. Mexico is heavily dependent on the US, which is the country’s largest trading partner.

Asked whether the investment screening agreement could harm Mexico-China business relations, Finance Minister Rogelio Ramírez de la O was blunt. “Our trade and financial relationship with the US is completely dominant,” he said while sitting next to Ms Yellen in the National Palace. “It’s not a great priority to dedicate time to countries other than the US.”

Michael Dunne, chief executive of car consultancy Dunne Insights, which focus on Asian countries, said Chinese companies were “realistic” that anti-China sentiment in Washington threatened to block access to the Biden administration’s generous EV subsidies. “It is clear to them there is a target on their chest,” he said.

The Takeaway

Two things are clear. The Chinese will find a way into the US market and the US will try everything in its power to prevent them from taking advantage of American production credits and tax incentives. China may have dreams of dominating some of its neighbors — especially Taiwan — but it is constrained by its need to sell Chinese made products to the US and the EU.

The US has tried and failed to keep the Germans, the Japanese, and the South Koreans out of its new car manufacturing sector. The Chinese will be the next to arrive, propelled by their prowess at making electric cars. What is astonishing is that they may well be able to compete head to head with American companies even if they are not eligible for those production and sales incentives on electric cars. Imagine that.

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Steve Hanley

Steve writes about the interface between technology and sustainability from his home in Florida or anywhere else The Force may lead him. He is proud to be "woke" and doesn't really give a damn why the glass broke. He believes passionately in what Socrates said 3000 years ago: "The secret to change is to focus all of your energy not on fighting the old but on building the new."

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