There are three big reasons to keep Chinese car companies from coming to the U.S. market without fetters: free markets, politics, and national security. Of those three reasons, only the first one is really important. The other two are fickle and mostly made of manure. Some of it fresher than the rest.
So let’s jump into all three of these. I’ve covered Chinese automakers and their entrance into markets several times now. Think of this article as a sort of roundup of the information found in those others. I’ll reference them as they come up.
Wouldn’t Free Markets Mean Allowing Chinese Vehicles An Open Market?
Sure, if the markets were that way on both sides in free and fair competition. But that doesn’t exist anywhere in the world. Especially in China. And definitely not here. But nevertheless, if your goal is to measure a level playing field, the field heavily tilts towards China when it comes to government interference.
When I talked about allowing Chinese vehicles into the U.S., I explained some of the background. Long story short, U.S. (and European) companies were required to follow some onerous rules to operate in China. Including building all of their product in country (or face heavy tariffs) and sharing technology with their Chinese partners, who had a mandatory 50/50 stake in operations. Eager and short-sighted enough to jump into the fast-emerging Chinese automotive market, western automakers like General Motors, Mercedes-Benz, etc. jumped in.
Those companies made money hand over fist. For a while. That’s now changing, and fast, as Chinese automakers (heavily bolstered by government funding and all that newly-gained automotive manufacturing technology) start taking over. The arena in China is now ready to begin a bubble burst as all of the run-to-market newcomers in Chinese automotive face less and less government backing both on the manufacturer’s end and the consumer side. This will lead to consolidation and the growth of the country’s larger domestic makes. Almost all of which are government owned. That’s right, with the exception of BYD, nearly every major Chinese automotive manufacturer is state-owned.
This fast growth to bubble has happened a lot in economic history globally, so it’s easy to see it’s happening in China right now. Boom-bust cycles like this are as old as time. It used to be kingdoms and governments that did it. Now it’s corporations.
What isn’t often discussed in the media regarding “cheap Chinese imported cars” is what created them: a combination of theft and government largesse..investment.
Since 2009, a good start as that’s when both the automotive bailouts in the U.S. happened and the beginnings of heavy automotive market investments by the Chinese government, the two countries have spent fortunes on domestic automotive manufacturing.
In the U.S., about $100 billion or so was spent between then and now. Mostly on the bailouts themselves and on various other projects like new energy vehicle (NEV) subsidies to consumers, EV infrastructure spending, and various tax breaks and grants to automakers for various things.
In the People’s Republic of China, about four times that has been spent, on the order of about $400 billion or so. Most of that split roughly in half on low-interest loans and subsidies or direct payouts to domestic automakers, suppliers, etc. and the other half directly to consumers in domestic EV purchase tax breaks and incentives. Even more has been spent lobbying and pushing foreign markets to allow Chinese-exported vehicles into their markets.
Most of the accounting that comes out pro-China on allowing imports—studies that were often linked to the Chinese government in one way or another—ignored all but direct government investment (as in cash given to automakers) when pushing for a more level playing field. Headlines like “Only 5% of Chinese Import Prices Are Due to Subsidy” and the like were the result.
The reality is that the hardest part of making an automotive company, building and scaling manufacturing, was largely paid for by the Chinese government. Most of the major automakers in China are literally owned by the government, who paid for them from the start. Others have received a lot of subsidization to build up operations. Compare that to the U.S. where companies like Tesla, Slate, Aptera, and other newcomers to automotive have had to build almost entirely from scratch via private investments. Tesla has been building itself up for decades while Slate and Aptera are both less than 20 years in and still not building a product.
Most of the domestic Chinese automakers that aren’t fully government owned are less than a dozen years old. BYD is the only exception, having introduced its first car in 2005, but the battery maker didn’t get serious about EVs until about ten years ago. Other companies, like SAIC Motor, Changan, Chery, and Dongfeng are government-owned/controlled entities and are all over 50 years old.
So insofar as “free market” and “level playing field” are concerned, that is definitely not the case and is a big argument for controlling how Chinese cars come to America.
Politics Are In EveryDamnThing Now
Everything in the U.S. is about politics. We tend to polarize everything into one of two camps: the “‘Murica First!” tent and the “Those Other Guys Suck” tent. So we’re either rabidly pro-USA/MAGA or rabidly anti-MAGA/USA (generally in the order shown between slashes). As an observer who doesn’t fall for either camp/party, it’d be the stuff of high comedy if it wasn’t negatively affecting everything around me.
In terms of automotive, pretty much everything to do with electrified vehicles, especially battery electrics, is politicized. If you like electric vehicles, you’re clearly in the anti-USA camp and probably believe Biden was the greatest president to ever live. If you don’t like electric vehicles, you’re clearly a Trump supporter who blindly follows all of the MAGA propaganda. Those are your choices when it comes to electric vehicles. Unless you like Teslas. Then you’re just a Nazi or something. That one’s a little less easy to pin down. Elon is hit-and-miss with the Trump side and very much hated (but still somehow also beloved) by the other side of the aisle.
At any rate, what we’re seeing with the EV thing politically is flowing over into the debate over whether or not we should allow China to export cars to U.S. shores. Often ignored in this argument is that both sides appear to agree that Chinese vehicles should not be allowed direct importation here. The first 100% tariff and import ban on Chinese vehicles was imposed by President Joe Biden.
Yes, you read that right. Biden banned Chinese vehicle imports. Biden also started the connectivity system, automated vehicle system, and software restrictions that go into effect in 2027. All aimed at China.
Then Trump.. uh.. trumpeted the same idea. And suddenly it was bad. Because that’s politics right now. It’s less about what you think is a good idea and more about who you should be hating.
And Then There’s National Security
This is the dumbest part of the whole thing. My generation (Gen X) has been bombarded with the phrase “national security” for our entire lives. It’s been the justification, impetus, and excuse for everything the U.S. government has done that came back to bite us in the buttocks afterwards. From war to domestic spying to terrible police tactics, the phrase “national security” has been called upon.
So forgive me if the use of this as an excuse for stopping Chinese imports brings up the end of my list and gets heavy layers of salt in the process.
The latest cries are about how consumer data will be used if the Chinese get ahold of it. I just failed a saving throw on Tasha’s Hideous Laughter. Because our government is one of the biggest collectors of that kind of data in the world. And seems very disinterested in regulating the private companies who do the same thing. And the ultimate sale of all that data to China.
So it’s pretty clear that on the surface, this excuse is pretty easy to scoff.
But there’s more going on here. What the government is apparently more worried about is infrastructure. All that data is getting more and more connected to infrastructure. And China definitely blocks foreign automakers from access to that same kind of infrastructure. It might allow modifications or destruction of that infrastructure.
Now it makes more sense. So maybe laughing off the whole “national security” line shouldn’t be done so hastily.
Just this once.
The Whole Thing Is Complicated
The end result here is that the memes, superfluous headlines, and partisan yakkity yak over pro- or anti-Chinese cars coming to the U.S. are over-simplifying. My thoughts, being a non-partisan, non-manufacturer is that we’re better off demanding a more even playing field before we allow imports.
The situation can be superficially compared to the influx of Japanese autos into the U.S. in the 1970s and ‘80s. But that’s not apples-to-apples with the current situation. Japanese makes had a long history of automotive before the Second World War, so the rebuilding of their plants afterwards isn’t comparable. Even though it was largely funded by American taxpayers, the rebuild was under Japanese terms and was over the top of already hard-won knowledge of the industry, pre-war. If it had involved mass-scale theft of trade secrets and knowledge, the Japanese makes would have looked a lot more Detroit than they did and we’d probably not generally consider Toyota and Honda to be the most reliable vehicles we can buy.
What’s happening with China and its automotive industry is the sudden, government-fueled growth of an industry that is immediately competitive, but probably not for the longer term. Eventually, as with all things funded by governments, the money begins to dry up as it gets prioritized elsewhere. Which is what we’re seeing now as subsidies for the purchase of new vehicles in China go away and the domestic market contracts as a result. It’s clear that the People’s Republic’s goal was to build an industry and then send it out into the world to become a major player globally. That is where the PRC’s focus is now.
And its this heavy imbalance of backing that is the reason we shouldn’t let Chinese cars come freely into the U.S. The way things are going, the European automotive market is going to completely transform for the worse because of Chinese vehicles. Cheap has a price.
This article originally published on the AaronOnAutos Substack.
