Counterpoints on Chinese Electric Cars Taking Over the World?

We’ve written a lot about the Chinese EV revolution and tariffs on Chinese-produced EVs sent to the US and Europe. The argument for the tariffs is that China and provincial governments have given Chinese EV producers too much support, resulting in overproduction and artificially low prices that are counter to the foundation of a free market and true commercial competition.

Of course, the counter argument is that all countries support their car producers and there is nothing unfair about what China has done. The tariffs are seen as protectionism and the actual assault on free market competition.

But this article isn’t about trying to determine which argument is right. Instead, a reader comment went in a different direction with this discussion and stimulated this article. On a recent story about Chinese EV producer innovation, “freedomev” commented: “Chinese innovation will likely die soon as 85% of the companies die in the next 3 yrs. They are presently in a race to the bottom price war. Though, out of that will come a few strong companies. Geely likely will be the strongest as doing exports more right by buying European car companies with their dealer, service, sales networks that build, sell in the US too now/Volvo.”

To tease that out, the point is that almost all of these Chinese EV producers are actually not profitable, are bleeding money by trying to stay cost competitive in a bloody price war that nobody can really sustain. (Or maybe just BYD? Or BYD and Tesla?) The argument is that, sooner or later, a bunch of Chinese EV producers will go belly up once they run out of funding and can’t get to profitability. As freedomev speculates, 85% of them.

Assuming that is the case, then, the question would be “how long until that happens?” If Chinese EV producers are losing money quarter after quarter, how long can they go on doing that before closing their doors? Also, assuming this is indeed the story, one might think, “But the Chinese government will save them.” That would not be likely, in my humble opinion. China let several major solar panel producers go under, including at times the largest solar panel producers in the world! There are might be more than 100 EV brands in China. Everyone knows those have to narrow down to some extent as the market matures and consolidates.

But is the premise correct? Will there be a collapse of dozens of Chinese EV producers in the coming years as the price war comes to its logical conclusion and these companies run out of money? Or will something change, like the price war cooling down and the automakers reaching enough sales to cover costs? These are tough questions to answer, but I tend to think that freedomev is right and we’re going to lose a large number of Chinese EV brands as the price war goes on and companies struggle to gain a positive return on their investments. What do you think? Chime in down below!

Featured image from Zeekr, one of the brands I definitely hope won’t fall victim to this hypothetical scenario.