Once upon a time, the world’s carmakers treated China like it was the biggest ATM on the planet. Put up with a local joint venture, maybe deal with a little IP theft (or a lot) and you get access to the world’s largest, fastest-growing car market right as the net worth of its middle- and upper-income buyers starts to explode. Chinese buyers get their cars, often for the first time, and automakers rake in the profits. Everybody wins.
But 2023 is the year where that little plan is starting to hit the skids—not on one front but two—and the automakers are split on how to deal with it.
Welcome back to this Wednesday edition of The Autopian’s morning roundup. I hope you’re feeling robust after your holiday weekend, and your customary post-holiday adjustment back to the work week. We’re discussing the China situation today, plus Volkswagen’s electric bus (remember that?) and Faraday Future’s car (also, remember that?)
I was off work last week, so you’ll have to help me get my morning news roundup sea legs back. I built a set of stairs on my deck over the holiday. They haven’t killed anyone yet. I’m feeling pretty good about myself. [Editor’s Note: There’s nothing more American than building a deck on Memorial Day. -DT].
Mercedes, Stellantis Differ On European Protection
When I say China’s becoming a problem on two fronts, I mean it almost like I would when describing a war. On one front, we have the fact that—surprise!—China’s homegrown auto brands are getting really good these days, especially with electric vehicles, and buyers there are turning to cars from the mother country instead of ones from Western or other Asian brands. The once-reliable Chinese buyer market is starting to get… a lot less reliable, suddenly.
Automakers are responding to this in different ways. Some are staying the course in China, trying to up their game. Others are trying to be more realistic; Ford is pushing cost cuts and focusing on markets where it has a competitive advantage, like delivery vans. But now it’s not implausible that some brands could exit China entirely.
That’s the first problem. The other problem is that these new Chinese brands are entering the European market themselves, and they’re rapidly gaining steam—often by undercutting their competition as the Japanese and Koreans once did. New brands like BYD are seen as a particular threat to Volkswagen, Mercedes, BMW, Stellantis and the rest on their home turf.
So then the question becomes, how protectionist does the European Union get in response? Mercedes and Stellantis differ on this approach, Bloomberg reports today.
Carlos Tavares, who heads Fiat and Peugeot maker Stellantis NV, warned Tuesday that competition will be fierce given the head start China has jumped out to in building batteries and affordable electric vehicles. During the inauguration of a battery factory in northern France, he reiterated his view that Europe’s political leaders ought to come to the aid of homegrown manufacturers that are struggling to keep pace.
“Whether the European car industry must be protected during the catch-up period, that’s a question that should be asked,” Tavares told reporters. “I think it would be reasonable to do so, at least in a degressive manner, so that we are on a real equal footing, given that the imbalance has been caused by the fact that the European regulation has been set exactly on the strongest skills of our Asian rivals.”
Tavares has said before that he favors stiffer tariffs on Chinese cars, specifically at a similar level to what the Chinese put on European imports.
Now, you may be saying “Let the market sort it out!” But remember, everybody plays this game. There are import tariffs on all sorts of goods, for one, and America has its own version of car market protectionism. There are all the zany regulations around pickup trucks and SUVs, for one, or the fact that we have 27.5% tariffs on Chinese-made cars. That’s a Trump-era policy; Biden’s kept it in place, and it’s probably what’s kept BYD from knocking on General Motors’ door. (They all ought to be sending Melania birthday cards over that policy, frankly.) Or remember how America stuck stiff tariffs on Japanese-made cars in the 1980s? They responded by just building factories here or making brands like Lexus to focus on profit margins. Nature, or capitalism, I guess, finds a way.
Any country’s auto industry is a crucial one for jobs, GDP, technological supremacy and more. They all have vested interests in keeping them healthy and making sure they aren’t decimated by foreign competitors.
Interestingly, Mercedes CEO Ola Källenius doesn’t agree with Tavares here. Maybe it’s because Mercedes is such a German car company, and Stellantis is a weird American-Italian-French-Dutch conglomerate. But Källenius told Bloomberg that, basically, it’d be stupid for Germany to provoke a full-on trade war with China:
In Europe, and especially in Germany, as it relies on exports as part of its successful business model, we should not increase protectionism. On the contrary, we should try to build on free trade. If you look at what we have done in China over the last 20 years, we’ve significantly built up our position there and took advantage of a growing market.
We also believe in investing there in the future and taking advantage of growth to come. So it’s not surprising that Chinese car companies try to make their luck on the world markets, as well. I think it’s important to carefully protect the market economy and free trade, and not to overreact.
Källenius also notes, rightly, that Europe is seeing much more intense competition in the affordable “volume segment” from these new players, i.e. cheaper cars. And he says he has no intention of getting Mercedes to compete with them there. It’s not his problem. It is, however, Stellantis’ problem (Opel, Fiat and so on) so maybe that helps explain this difference of opinion here.
The point is, car companies hinged a lot of hopes and profits on China. Now the game is changing there and on their home fronts. And it has the potential to upend a lot of how the global car business works.
Elon Musk Is On China’s Good Side, For Now
Meanwhile, if you’re Elon Musk, you get “flattery and feasts” when you come back to China, as Reuters puts it. Musk was there for the first time in three years—blame the country’s COVID restrictions—and he was there to make nice with government ministers and battery supplier giant CATL. Evidently, Musk is still super popular in that country, as is Tesla, despite its own waning EV market share there and a few pricing missteps that led to actual protests this year. From this Reuters story:
He’s “a pioneer”, “Brother Ma” and some want him to be U.S. president. Billionaire Elon Musk has been showered with praise by the Chinese public during his trip to the country while also securing audiences with three government ministers.
While little is known of those conversations – the industry ministry only said Musk and its head exchanged views about the development of electric vehicles and connected cars while the commerce ministry announced he discussed Tesla’s development in China with its head – that hasn’t stopped an outpouring of enthusiasm for Musk on Chinese social media.
“He’s a global idol,” commented one user. “Elon Musk is just great, if only China could have someone like Elon Musk,” said another.
[…] But compared to lower-key welcomes for his counterparts, Musk’s visit is a hot trending topic and his popularity comes despite rising U.S.-China tensions, with keen interest shown in his comments on artificial intelligence and electric vehicles.
Even the menu for the 16-course meal at the upmarket Man Fu Yan restaurant he shared with CATL’s Zeng on Tuesday evening was effusive, photos posted on social media showed.
Aside from the social media fawning, it’s not clear what Musk wanted to talk about, though he has been seeking government approval of his troubled Full Self-Driving technology for China. (Folks, you may be better off without it.)
But one thing is clear to me: Tesla’s a little more vulnerable to the winds changing in China than other automakers. Establishing Giga Shanghai and getting it running smoothly is how Tesla really became a consistently financially stable company and that only happened in the last couple of years; it’s a huge part of how the Model Y became the world’s best-selling car recently. Tesla is also one of the few—maybe only, I’m not entirely sure—automakers that never had a local Chinese joint venture partner.
Basically, Musk has every incentive to keep his relationship with China strong and positive. Scaling back there, or advocating for tougher tariffs, isn’t an option for Tesla.
The American-spec 2025 Volkswagen ID.Buzz will finally be “revealed” later this week. I use that in quotes because, dear God, this thing has been around forever and somehow still isn’t on sale yet. I mean, the concept dropped way back in January 2017—approximately 500 human years ago—and after years of ongoing reveals Jason drove the Euro-spec version last fall. The rollout for this thing has been interminable. Are we sure it’s not a joint venture with Tesla?
Anyway, all I’d ask of Volkswagen is some actual news at this point. We know the specs. We know what the damn thing looks like. How much will it cost here? I wouldn’t be shocked if VW did the “pricing available closer to launch” thing that every automaker does, but come on; how much longer do we need to wait? It goes on sale in 2024, or so VW says.
Expect more on this soon; Jason will be there to drive it. One day, his grandchildren may even be able to buy one at an American dealer.
Say It With Me Now: LOL
Yes, it’s crazy to mention Volkswagen and Faraday Future in the same beat. But speaking of delays, all of you who were begging for the FF 91 can finally get one now. The limited edition FF 91 2.0 Futurist Alliance model launched this week.
Its price tag, according to Reuters? Just $309,000.
The startup also launched the regular FF 91 2.0 Futurist model and added that it was available for preorder, without revealing price details.
In addition, it launched a subscription-based mobile ecosystem product called “FF aiHypercar+”, which will offer integrated software, internet, and personalized AI algorithm services among others, the company added.
Did you actually buy a Faraday Future car? Get at us, we want to talk to you. I’m serious. No judgment here, I’m genuinely curious. Just be warned that if you’re in a position to spend north of $300,000 on this thing, lunch is probably going to be on you.
The Jeep-King Of The Design World Retires
Just so you’re aware, this part of the news roundup is being written by David Tracy, not Patrick. I’m just here to mention that Mark Allen, a genuine Jeep guy and car-nut, has decided to retire from Stellantis, which — as a former employee — I will always refer to as “Chrysler.” Mark is an incredibly talented, and just genuinely cool guy who gets Jeep like few others do. He’s been responsible for the awesome Easter Jeep Safari vehicles that show up each year. I’ve had a great time hanging out with him on the off-road trails of Moab and at events like the Toledo Jeep Fest. Honestly, I’ll miss him. -DT
Protectionism! Who is it good for? Does it even work? Are countries, or the EU, right to protect their local auto industries?
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