More fundamentally, subsidising cars disincentivises alternative urban structures and policies that don't have cars front and centre. Bike-oriented and walking-oriented streets might be nicer places to live and work, but we'll never know because the Chinese government is tilting the scales against creating these.
Carefully tiptoeing around the real reason China can make cars more cheaply (even before their vast subsidies) than in the west - they still have cheap energy, while we pursue the pipe dream of Net Zero. Meanwhile, even if EVs cost only $5,000 it would make no difference to all those with no visible means of charging them.
The AI picture is deformed. The material world is becoming more relevant, but it doesn't make sense that there isn't a reusable chassis that could lower the cost of repairs and rebuilds. Even if a model is made to cost $10,000, it's going to cost $8000 more than repairing a $2000 part (part + labor) if that is the only thing that's broken. https://github.com/hatonthecat/Open-Source-Car
China dominates World manufacturing in just about every area, not just EVs. So the reason is not government subsidies, because it dominates in unsubsidised manufacturing too. I would recommend anyone read former New York Times China correspondent Peter Hessler’s books on China. In one he describes his time with a bra manufacturer in a remote area of China that somehow became the World center of ladies underwear. The competition between the manufacturers was ferocious, as was the drive of the business people. The Chinese governments main contribution to EVs was building great infrastructure and providing a good education system and lax Labor and environmental standards. The local entrepreneurs did the rest.
A rising China is however not bad for the U.S. and Europe. EVs and solar panels are a great example of why. The cheap prices allow everyone to have them which will be great for the environment and improve everyone’s lives. America can buy hamburgers and weapons with the money saved. Demography will catch up to China. Vietnam and India are already reaping the benefit. The big challenge for China will be the same as Japan, shifting to a sustainable rich service economy like the U.S. That is much harder.
Absolutely superb piece Ed. I feel that China is demonstrating that it's never been competition that drives efficiencies and low costs for consumers. It's always been scale, economies of scale. Was true for Henry Ford too, he found ways to manufacture efficiently, at scale. There is no real competition for China now with EVs, and it's still driving the prices down, because of its massive industrial scale of production and control of supply chains. It feels like economics itself needs to understand this very (material) lesson, rather than continue to trade only in abstract generalities about supply and demand.
Perhaps look at lifetime emissions and total cost of ownership . Look at the resale value of the Porsche Taycan . Maybe China is producing cars no private buyer wants . Toyota certainly think most of the world will never be ready for EV . Also the potential to turn them off remotely is possible . Look at John Deere tractors . All stolen from Ukraine were remotely immobilised .
Hi Ed, I've just finished Material World, having first heard your podcast about it with Michael Liebreich. Excellent and thought provoking book. I'm a senior manager at one of the big European energy companies leading the [Western] energy transition. To be honest I don't know how this all pans out. We in the West are diverting resources to net zero, electrifying everything including heating and transportation. The net result funnels wealth, dominance and control to China and developing country supply chains. All while coal consumption in the developing world doubles every decade.
Is there an historical parallel between (1) concerns now over the shift of car manufacturing from Europe / the US to China and (2) concerns over goods manufacturing shifting from Britain to Germany during the late 19th century?
More fundamentally, subsidising cars disincentivises alternative urban structures and policies that don't have cars front and centre. Bike-oriented and walking-oriented streets might be nicer places to live and work, but we'll never know because the Chinese government is tilting the scales against creating these.
Carefully tiptoeing around the real reason China can make cars more cheaply (even before their vast subsidies) than in the west - they still have cheap energy, while we pursue the pipe dream of Net Zero. Meanwhile, even if EVs cost only $5,000 it would make no difference to all those with no visible means of charging them.
The AI picture is deformed. The material world is becoming more relevant, but it doesn't make sense that there isn't a reusable chassis that could lower the cost of repairs and rebuilds. Even if a model is made to cost $10,000, it's going to cost $8000 more than repairing a $2000 part (part + labor) if that is the only thing that's broken. https://github.com/hatonthecat/Open-Source-Car
China dominates World manufacturing in just about every area, not just EVs. So the reason is not government subsidies, because it dominates in unsubsidised manufacturing too. I would recommend anyone read former New York Times China correspondent Peter Hessler’s books on China. In one he describes his time with a bra manufacturer in a remote area of China that somehow became the World center of ladies underwear. The competition between the manufacturers was ferocious, as was the drive of the business people. The Chinese governments main contribution to EVs was building great infrastructure and providing a good education system and lax Labor and environmental standards. The local entrepreneurs did the rest.
A rising China is however not bad for the U.S. and Europe. EVs and solar panels are a great example of why. The cheap prices allow everyone to have them which will be great for the environment and improve everyone’s lives. America can buy hamburgers and weapons with the money saved. Demography will catch up to China. Vietnam and India are already reaping the benefit. The big challenge for China will be the same as Japan, shifting to a sustainable rich service economy like the U.S. That is much harder.
Absolutely superb piece Ed. I feel that China is demonstrating that it's never been competition that drives efficiencies and low costs for consumers. It's always been scale, economies of scale. Was true for Henry Ford too, he found ways to manufacture efficiently, at scale. There is no real competition for China now with EVs, and it's still driving the prices down, because of its massive industrial scale of production and control of supply chains. It feels like economics itself needs to understand this very (material) lesson, rather than continue to trade only in abstract generalities about supply and demand.
Brilliant article Ed! You just can not look past China to take market share of the EV industry.
Perhaps look at lifetime emissions and total cost of ownership . Look at the resale value of the Porsche Taycan . Maybe China is producing cars no private buyer wants . Toyota certainly think most of the world will never be ready for EV . Also the potential to turn them off remotely is possible . Look at John Deere tractors . All stolen from Ukraine were remotely immobilised .
Hi Ed, I've just finished Material World, having first heard your podcast about it with Michael Liebreich. Excellent and thought provoking book. I'm a senior manager at one of the big European energy companies leading the [Western] energy transition. To be honest I don't know how this all pans out. We in the West are diverting resources to net zero, electrifying everything including heating and transportation. The net result funnels wealth, dominance and control to China and developing country supply chains. All while coal consumption in the developing world doubles every decade.
Txs. A very good article. And yes we need a better industrial policy.
Some minor details as price reduction to Single piece casting (of which Tesla was the first to implement).
https://x.com/lucagrecoita/status/1777397389139104103
Is there an historical parallel between (1) concerns now over the shift of car manufacturing from Europe / the US to China and (2) concerns over goods manufacturing shifting from Britain to Germany during the late 19th century?