With changes to the electric vehicle market, will Chinese EVs take over the American automotive industry soon? This is a concerning question on the minds of many US auto executives.
If the American government could show some consistency from one regime to another, we would probably much further along in the quest for cleaner and more efficient transportation. Unfortunately, when one side zigs, the other zags, leaving automotive companies scrambling to meet the changes in the market. This has left America far behind China in terms of electric vehicle development, which should be a warning sign.
Why should American companies worry about Chinese EVs?
China’s electric cars are cheaper
Although many Americans haven’t embraced electric vehicles, if China were to gain a foothold in America and begin selling electric vehicles here, they could become extremely popular with many drivers. Currently, electric cars cost nearly $25,000 less in China than the average model in the United States. That $7,500 Federal EV Tax Credit won’t cover that cost difference, and many buyers are still cost-driven, mostly because they have to figure out how to fit a new car purchase into their regular budget. $25,000 translates to an average difference of $500 per month in payments depending on the interest rate. This is a significant saving compared to the higher cost of American EVs.
Tax credits are going away
In an example of butting heads in America, the Federal EV Tax Credit, which was revamped under the Inflation Reduction Act, passed while Joe Biden was President, has a new expiration date. Originally, it wasn’t set to expire until 2032, but now these credits will end on September 30, 2025. That seven-year difference levels the playing field for all EVs being sold. Under the current tax credit rules, the vehicle being purchased must meet some strict requirements, including battery components mined from allied countries, which leaves China out of the mix. With the credits expiring, shoppers will look for the best deal and not have to think about receiving an additional incentive, which means automakers are no longer incentivized to build EVs in America or worry about where the elements are mined.
China is making better cars
You might never think that China would be ahead of America in terms of vehicle quality, but it’s happening right now. Chinese EVs are “far superior” to those built in America. This was stated by Ford CEO Jim Farley when commenting on the rapid growth of Chinese electric vehicle companies. Vehicles made in China tend to be more technologically advanced, of higher quality, and much more affordable than those made in America. Instead of acting as if the EV market is a fad or blip on the radar, China embraced electricity as a viable solution to the limited supply of oil, and that has led to the country being much further along than the United States.
“China has an incredibly broad range of EVs catering to the needs of the entire market, while the development of EVs for many popular manufacturers in the US is still at a comparatively early stage.” – Will Roberts, head of automotive research for battery and EV consultancy Rho Motion
Standard tech is much better in China
Many of China’s largest auto companies began in the tech world by making cell phones and developing software. This has led to Chinese EVs being much more advanced than models sold in America. In fact, many electric vehicles sold in China come with autonomous driving, voice recognition, and in-car AI assistants as part of the standard packaging. These items are often add-ons in the American market.
Apple recently scrapped its car program, but its direct Chinese rivals, Huawei, and Xiaomi, have since entered the electric vehicle market. This is a clear indication of how far ahead China is in this sector. It’s also an indicator of how well China has embraced electric vehicles compared to the United States.
“They have far superior in-vehicle technology. Huawei and Xiaomi are in every car. You get in; you don’t have to pair your phone. Automatically, your whole digital life is mirrored in the car.” – Jim Farley, Ford CEO
What’s stopping China from entering the American EV market?
Currently, it would be extremely difficult for Chinese EVs to gain a foothold in America for at least two reasons. Despite consumers embracing Chinese-made products across many industries, most aren’t willing to drive cars made in China. Also, the extremely high tariffs imposed by the current administration would likely destroy any cost advantage Chinese EVs have over American models.
Still, unless American automakers want China to take over their EV space, they better learn and grow, but that takes a much stronger commitment to selling EVs, which also requires governmental support, which isn’t currently being offered at the highest levels of the American government.