By Duggan Flanakin for the CFACT.org | August 17, 2023
According to Lauren Fix, the Car Coach®, China is well on its way to becoming a world leader in climate policy and is quickly taking over the electric car industry – and thus (barring mandate reversals) the entire auto industry.
Talk about snake oil sales! But is Xi Jinpeng that smart, or are European and American politicians, business magnates, and globalist plutocrats just that dumb?
Fix says the Chinese decided in 2001 they could not compete on the international market with legacy automakers with gasoline vehicles or hybrids. They opted to create a new market for the then-niche-market battery-electric vehicles.
China elevated EV technology as a priority science research project in its 2001 Five-Year Plan and expanded its control over the global EV battery supply chain. China already controlled 70 percent of critical materials like cobalt, nickel sulfate, lithium hydroxide, and graphite before other companies and nations recognized their vital importance.
The Chinese also built out manufacturing capacity and entered into joint ventures in which foreign companies had to share their technology with Chinese companies to enter the fast-growing Chinese auto marketplace.
After $29 billion of subsidies and tax breaks, the now-mature Chinese auto industry jumped domestic sales from 1.3 million EVs in 2020 to 6.8 million in 2022 – a year in which only 800,000 EVs were sold in the U.S., And Chinese auto companies have begun entering the retail market in European countries.
As Michael Dunne pointed out in his 2011 book American Wheels, Chinese Roads, China created its joint-venture auto industry strategy with three identifiable goals. Step 1, form joint ventures with leading global automakers. Step 2, absorb foreign partners’ design, engineering, and manufacturing technologies. Step 3, build autos under China’s own brand names.
And the West blindly fell for the Chinese strategy, hook, line, and stinker, at least until now.
Headline: “Europe faces Chinese cheap car ‘invasion’, Vauxhall owner warns.” Carlos Tavares, CEO of Stellantis, which owns the British automaker Vauxhall, as well as Peugeot, Fiat, and Jeep, recently warned of a coming “invasion” of cheap Chinese cars in European markets.
Tavares warned fellow automakers to comb over their businesses and cut costs. The Chinese can build electric vehicles for 25 percent less than the rest of the world, largely because of lower labor and materials costs and their in-house supply chain for battery components.
Will Chinese brand-name cars be coming to America soon?
Thanks to mandates not supported by the public on either continent, electric vehicles are being forced upon European and American drivers at increasing rates. The Biden Administration is following Europe’s lead. European and American automakers cannot compete with Chinese companies, so they are joining them.
This bodes ill for American and European auto workers, the driving public, and ultimately the sovereignty of both the U.S. and the EU. Automakers outside China are now telling their politicians to stop letting China dictate national policies on electric vehicle mandates that help China and harm their own manufacturing sectors. Many even fear there will not be enough EV batteries to meet demand.
One company firmly committed to an all-EV future is General Motors, long the top-selling U.S. automaker. GM, in 2021, introduced its “revolutionary” Ultium electric vehicle platform as the wave of the future. But how much has GM been influenced in its all-or-nothing direction due to its lucrative joint venture with the Shanghai Automotive Industry Corporation (SAIC)?
Despite COVID-19-related global supply chain disruptions, GM and its joint ventures sold about 2.9 million vehicles in China in 2021, including luxury vehicles and “new energy vehicles.” In 2022, the GM-SAIC joint venture continued its focus on marketing luxury and premium models and NEVs. China is today the largest automobile market in the world.
The 50-50 GM-SAIC joint venture emerged from talks in 1995 that led to GM-SAIC auto plants in four Chinese cities. SAIC-GM now manages the Buick, Cadillac, and Chevrolet brands for the Chinese market, as well as GM’s OnStar telematics service. By mid-2020, SAIC-GM had sold its 20 millionth vehicle.
When GM got $50 billion in bailout money from the 2009 Troubled Asset Relief Program (TARP), SAIC was a big beneficiary. By 2016, GM was shipping Chinese-made Buicks and Cadillacs for sale at its U.S. dealerships. Few may know that the 2009 bailout included, as a secretive “Chinese” component, the SAIC bonanza.
As the U.S. auto task force had refused to allow GM to spend TARP monies on its foreign operations, GM cut a sweetheart deal with its SAIC that gave its Chinese partner significant control over the future direction of GM’s global operations even though the U.S. government still owns 11 percent of General Motors.
Up until 2009, GM’s Asian market was guided by its Korean partnership with Daewoo Automotive Technology (GMDAT). When GMDAT began failing in 2009, GM sold 1 percent of Shanghai GM to SAIC for a paltry $85 million, giving the Chinese a controlling stake in the joint venture.
At the same time, GM turned its GM India division into a 50-50 joint venture with SAIC. In 2010, GM secured an additional $400 million loan with SAIC’s help. The Chinese have been heavily influencing GM policies ever since. On the other hand, perhaps the Chinese are getting that tried-and-true message about “baseball, hot dogs, apple pie – and Chevrolet.”
In 2021, GM-SAIC opened its first Ultium Center in Shanghai to assemble battery packs for Chinese-built Cadillacs, Buicks, Chevrolets, and GMCs. The joint venture, which also sells the Chinese brands Baojun and Wuling, is truly a Chinese-run operation.
Despite its deep involvement in China, GM has committed $650 million toward the construction of Lithium Americas’ Thacker Pass (Nevada) lithium mine, which is now on schedule to begin operations by 2026 despite objections by local Native American tribes. The Nevada mine is still a bone of contention, and a forthcoming Harvard Environmental Law Review report claims that the EV revolution is putting America’s Indigenous communities at risk.
Ford Motor Company has, to date, fended off Chinese efforts to purchase total control of the second-largest American automaker. But Ford, which began exporting cars in China in 1913, has over 50 dealerships there today thanks largely to a joint venture with Changan Automobile. Ford today is China’s fifth largest foreign automaker – and is selling Fords built in North America to the Chinese market.
The Trump Administration was the first to raise the red flag about Chinese domination of the EV auto market, but the Biden Administration chose to throw out the Trump initiatives and create new ones with their own branding. This may have set back the effort to play catch-up with China, which is now dealing with a partial collapse in the lithium market.
But the question remains. Will Europe and the U.S. admit they have been snookered by the Chinese into an all-EV future in an effort to “save the planet”?
Meanwhile, China mocks “net zero” as it builds more coal-fired power plants to power the manufacture of cheap Chinese EVs that can easily undercut every other nation’s auto industry. Can the West even come close to creating a China-free EV supply chain big enough to meet global demand before the Chinese capture the world market for themselves?
Duggan Flanakin is a Senior Policy Analyst with the Committee For A Constructive Tomorrow. A former Senior Fellow with the Texas Public Policy Foundation, Mr. Flanakin authored definitive works on the creation of the Texas Commission on Environmental Quality and on environmental education in Texas. A brief history of his multifaceted career appears in his book, "Infinite Galaxies: Poems from the Dugout."
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