I still think that despite, well, everything, President Biden ought to send President Trump a nice card on his birthday every year. Why? Because the Trump Administration’s stiff 27.5% tariff on Chinese-built cars is effectively what’s keeping them out of the U.S. market right now. Now even Henry Ford’s great-grandson is ringing the alarm that we have some catching up to do on the EV front before they inevitably get to U.S. shores.
A fine Monday morning to all of you in Autopia. Our staff has been given the day off out of respect for the Juneteenth holiday here in the U.S., but we have plenty of news and features on tap for you as well. And the rest of today’s news roundup that you’re currently reading includes some interesting details on China’s rural electrification struggles; Mercedes’ challenges around deploying higher levels of automated driver-assistance systems; and more news around the unfortunate Hyundai EV power loss issues. Let’s get started.
Tariffs Buy America Some Time On The EV Front
Everywhere I turn, I find some auto exec who’s at least mildly freaked out about the progress China has made in developing its EV market. The big Auto Shanghai show this spring, the first one since the pandemic broke out, was apparently a wake-up call to the rest of the auto industry; since last we all looked at this still very secretive, closed-off market, China has grown by leaps and bounds not just in EV tech but in keeping costs down. Cost, in particular, is the next big frontier to conquer. Building EVs at scale and ensuring profitably is a ways off for Hyundai, General Motors, Toyota, you name it—while BYD and its ilk are getting better and better at it.
Naturally, the Chinese automakers’ ability to sell (apparently) impressive EVs at low costs with profitable margins flies in the face of the strategy we see here: car companies will finance EV and battery development costs by selling big gas trucks and SUVs, and EVs will stay in the luxury and mid-tier price ranges until costs go down—hopefully helped along by tax breaks. But if a decent BYD EV can be sold here for $25,000, that’s a real problem.
Ford’s Executive Chairman Bill Ford sounded the alarm somewhat on CNN’s Fareed Zakaria GPS recently, and here’s Fortune to summarize:
Ford Motor Co. Executive Chairman Bill Ford Jr. said the US is “not quite yet ready” to compete with China in the production of electric vehicles and said his company is taking an “all hands on deck” approach to prepare.
“They developed very quickly, and they’ve developed them in large scale, and now they are exporting,” Ford said in an interview on CNN’s Fareed Zakaria GPS. “They are not here, but they will come here we think at some point and we need to be ready, and we’re getting ready.”
China is poised to become the world’s No. 2 exporter of passenger vehicles, potentially reshaping the global auto industry and shaking up the dominance of its car trading partners and rivals. Overseas shipments of cars made in China have tripled since 2020 to reach more than 2.5 million last year, challenging traditional car exporters such as Germany.
This is why the Inflation Reduction Act had such aggressive rules around North American battery and minerals production—if the market goes fully electric, this way we don’t cede total control of that forever to China, which is how things more or less are now.
How long do Chinese cars stay out of our market, given their skyrocketing popularity in Europe and Australia—places where people are sick of sky-high new car prices just like Americans are? U.S. Secretary of State Antony Blinken is visiting Beijing this week and relations between China and the U.S. remain, I don’t know, not amazing. But to me, it feels hard to believe rolling back car tariffs would be on the table anytime soon and not without a significant lobbying fight by the auto industry here.
But Ford’s right here. It’s not a question of if, but when.
China’s Rural Electrification Problem
I also talk to a lot of people in the auto industry and in transportation policy who occasionally border on being delusional when it comes to EVs. By that, I mean they believe that we’ll all just be driving battery cars by 2035 or so, that’s it! We’re done! Planet saved!
Yeah, no fast, I’m afraid. Besides the question of the climate impact of all the gasoline cars that will still be on the road if EVs go mainstream, it’s like… driving EVs where? In what markets? You have to admit it’s easier to electrify in Norway or California or Western Europe than it is India or Africa or Latin America—and those people deserve clean air just as much as more developed areas do.
And as far ahead as China is in the EV race, it has this same problem too. Here’s a fascinating dispatch from Bloomberg:
It’s not just price and range holding back the hundreds of millions of people who live in the thousands of small cities and rural towns across China. A lack of charging infrastructure and dealerships (many EV makers prefer a Tesla Inc.-like direct online sales channel) also deter people from going electric. Then there’s the mismatch between the sleek, tech-laden EVs popular in the wealthy metropolises of Shanghai and Shenzhen with the need for more rugged and practical vans and light trucks needed to haul everything from work tools to farm goods in rural areas.
While China has the world’s largest clean car market, selling 5.67 million such vehicles in 2022, sales have been concentrated in big cities. Overall growth is slowing and the penetration of EVs in less-developed regions is still relatively low — at 21% of new car sales in the first four months of 2023, compared to around 40% in the largest cities, according to BloombergNEF. Closing that gap is key toward China’s goal of reaching net zero emissions by 2060 and supporting the nation’s auto industry.
China’s automakers still sell a ton of hybrids and PHEVs, too. But the challenges of costs and available vehicle types are limiting EVs for those rural buyers, and the government is trying to juice sales with tax breaks and public-awareness campaigns. They’re hyping the availability of home-charging in rural areas that city-dwellers lack, and the low maintanence costs over time. I just wonder if their electric grids are ready for this—especially since the country still relies heavily on coal for power.
Anyway, it’s interesting to hear China has the same problem as America and many other places in the world, despite the early EV lead.
Mercedes’ Drive Pilot Has Big Promises, Lots Of Questions
The automakers are still chasing a dream of full autonomy for cars, but that’s a decades-off, long-term dream; I still think a car won’t be “fully self-driving” until you can take a nap in the backseat anywhere in the world and still get where you’re going without issues. That’s a very high bar to clear.
Which doesn’t sound great to me, honestly? This sounds a bit like Tesla’s Full Self-Driving Beta system (it’s nothing of the sort, to be clear) where I end up expending more mental and emotional energy minding the car than I would actually driving it myself. So one researcher describes L3 systems the way I’d describe one of our staffers’ project car ideas:
As that article explains, in an L3 system, the “human” is not considered the “driver” anymore. Drive Pilot is slated to launch on 2024 Mercedes S-Class and EQS sedans this year and on certain roads in Nevada and California, it’ll be capable of driving up to 40 mph. But the legalities around what a human passenger will be allowed to do in such a car, and who’s responsible if something goes wrong, will remain unclear for a while.
One MIT study cited here said it took an average of 6.1 seconds for a person’s attention to fully return to driving when prompted by the car. A lot can go wrong in six seconds.
NHTSA Gets Involved In Hyundai Power Loss Issues
Everybody loves the Hyundai Ioniq EVs, but they haven’t been without their problems. One annoying issue has led to a severe battery drain that’s left motorists stranded at times, as we reported a few months ago.
Now America’s federal safety regulator is stepping in. Here’s the Associated Press:
Multiple U.S. owners of Hyundai’s popular Ioniq 5 electric SUV have complained of completely or partially losing propulsive power, many after hearing a loud popping noise, the National Highway Traffic Safety Administration said Saturday.
The Office of Defects Investigation at the NHTSA has opened a preliminary investigation and says Hyundai indicated in an initial review that a power surge was damaging transistors, preventing vehicles’ 12-volt battery from recharging.
Hyundai spokesperson Ira Gabriel said the company was fully cooperating with the investigation and was launching a service campaign in July to update affected vehicles’ software and, if necessary, replace the component involved. It’s called an Integrated Control Charging Unit.
Building cars is hard—especially these new ones.
Chinese cars in America? Rural electrification? What’s your take on all of it?
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