A Flood Of Cheap Chinese Cars Threaten U.S. and European Automakers

The biggest threat to U.S. and European car companies comes from a new crop of Chinese automakers, especially BYD, which specialize in producing plug-in hybrid and fully electric vehicles. BYD’s growth is astounding: It sold three million electrified vehicles last year, more than any other company, and it now has enough production capacity in China to manufacture four million cars a year.

But that isn’t enough: It’s building new factories in Brazil, Thailand, Hungary and Uzbekistan, which will produce even more cars, and it may soon add Indonesia and Mexico to that list. A deluge of electric vehicles is coming.

BYD’s cars deliver great value at prices that beat anything coming out of the West. Earlier this month, BYD unveiled a plug-in hybrid that gets decent all-electric range and will retail for just over $11,000. How can it do that? Like other Chinese manufacturers, BYD benefits from its home country’s lower labor costs, but this explains only some of its success. The fact is that BYD — and Chinese automakers like Geely, which owns Volvo Cars and Polestar brands — are very good at making cars. They have leveraged China’s dominance of the battery industry and automated production lines to create a juggernaut.

The Chinese automakers, especially BYD, represent something new in the world. They signal that China’s decades-long accretion of economic complexity is almost complete: Whereas the country once made toys and clothes and then made electronics and batteries, now it makes cars and airplanes. What’s more, BYD and other Chinese automakers are becoming virtually global car companies, capable of manufacturing electric cars that can compete directly with gas-burning cars on cost.

That is, on the surface, a good thing. Electric cars need to get cheaper and more abundant if we are to have any hope of meeting our global climate goals. But it poses some immediate and thorny problems for American policymakers. After BYD announced its $11,000 plug-in hybrid, it posted on the Chinese social media platform Weibo that “the price will make petrol car assemblers tremble.” The problem is many of those gasoline carmakers are American.