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0 pointsdangus2y ago0 comments

I’m more bearish of the idea of a major paradigm-shifting Chinese EV incursion to the US.

The US automotive market plays a completely different game than the rest of the world, with a bunch of protections and quirks that have a great potential to stifle a disruptive innovator.

First: the products themselves are regionally unique. The #1 selling vehicle in the US is the F-150, a truck that is a completely insane purchase for most of the rest of the world’s population. Japan may have disrupted the US market, but many of their vehicles they sell in big volumes are designed in America built in America sold primarily to Americans. BYD can’t sell the Qin Plus in America, they need to sell something more like the Rivian R1T. That means BYD needs a US factory to avoid the chicken tax…

Second: The US already shows high willingness to “chicken tax” EVs. All the vehicles that qualify for the EV tax credit are Ford, GM, and Tesla vehicles with high domestic part counts. The government can play this game until the cows come home giving the big 3 ample time to catch up.

So we’ve established that if you’re selling big volumes in America, you are producing cars in US factories. In that regard, China has a weak record of success. If they want to sell trucks in America they’ll probably have to have a UAW factory. The documentary “American Factory” comes to mind for me.

At best, this means that China won’t get the typical labor cost advantage that their entire export economy thrives on. What is their competitive advantage at that point?

Third: the dealer network. Operating in the US means dealing with independent dealerships often enshrined by law. Tesla had to fight an improbable battle to get to the scale it is now without independent dealerships.

Fourth: the incumbents have good tech and are high volume producers in their own right. BYD is big. You know who is bigger? Volkswagen. Toyota. GM. Ford. Even Tesla is bigger by global revenue. 17 other global automotive companies pull in more revenue than BYD, and 9 pull in more revenue than SAIC.

By the way, the “$5,000 used car killer” has been a legend for decades and will never happen in developed markets with strong safety regulations and demanding living standards. Americans literally do not buy city cars, new or used. Get back to me when the Cherry QQ more closely resembles the Ford Maverick.

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fragmede2y ago

A 25% import tarrif on a $4,000 car rounds it up to $5,000. Are you sure they have to manufacturer them in the US at that price point? There's no getting around the F150's dominance, but the Japanese Suzuki Samurai has an absolute cult following among the rural gearheads I know that also own F150s and 350s. I don't see why a Cherry QQ couldn't achieve the same thing in a different segment of the market on sheer price.

Now, I'm skeptical that, after all the US safety regulations are met, that it could still be made for $4,000, but the utter manufacturing advantage of paying Chinese workers in Chinese factories local wages is not to be underestimated.

dangusOP2y ago

How many labor hours could it possibly take to assemble a car that costs $5,000 retail? Probably a lot less than a more expensive car, right?

$1000 in tariffs can pay an American factory worker’s total compensation for something like 15-20 hours. But you don’t even have to pay that wage when there’s Mexico.

Find me a top 20 vehicle that’s produced outside of NAFTA: https://www.kbb.com/best-cars/top-10-25-best-selling-cars-tr...

The Suzuki Samurai’s cult following only exists because it was a vehicle that was literally discontinued for slow sales. This example of a winning formula is from an entire brand that left the US market for being too far downmarket.

Cheap city cars struggle to survive and most have exited the US market. Recently discontinued models include the Chevy Spark/Aveo, Mazda2/Toyota iA, Mitsubishi Mirage, Honda Fit, and the list goes on.

The low cost of gas, low vehicle taxes, plentiful infrastructure for larger vehicles, the high profitability of financing, and high median wealth has pushed the US auto market upmarket. Brands who try to sell a utilitarian experience tend to get burned. Brands that sell financing reap the profits.

applied_heat2y ago

Are the raw materials that much cheaper in China? I hope there is more than $4k worth of materials in any vehicle I drive or how long can it last?

pinkgolem2y ago

Raw steel cost should be less then a pound per kg

I would be highly surprised if the raw ingredients for any car would be more then 4k, but that's also not a very useful metric.. i guess a cpu Would be a few cents

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