...US and EU need to focus on reducing battery costs to ward off the Chinese EV auto invasion.
...the end outcome must be cheaper battery costs to support EV growth that facilitates mass adoption. An auto C.E.O.’s plan to fend off China
Tesla is scheduled to announce first-quarter delivery data this week, a key update as investors grow increasingly rattled about Chinese rivals — especially the Warren Buffett-backed BYD — gaining ground in the electric vehicle race.
Politicians and auto executives on both sides of the Atlantic are calling for more protectionist measures. After Tesla lost its crown to BYD as the world’s biggest E.V. maker, Elon Musk signaled that trade barriers may be needed. Otherwise, the Tesla C.E.O. said, Chinese E.V. makers “will pretty much demolish most other companies in the world.”
Luca de Meo, Renault Group’s C.E.O., is pushing for a more radical approach, Vivienne Walt reports for DealBook. His answer to the China threat: an E.V. alliance modeled on Airbus, the heavily state-supported planemaker.
“The prosperity of Europe is at stake,” he wrote recently in a 19-page open letter designed to get politicians’ attention ahead of June’s E.U. parliamentary elections. The continent’s auto sector employs 13 million people and generates 8 percent of the bloc’s G.D.P.
Here’s what de Meo has in mind: European auto giants would join forces on battery and semiconductor production and on research and development in an effort to bring down EV manufacturing costs and better compete against their non-European rivals
“If they’re competing as they are, they are weaker in front of China,” Felipe Munoz, senior analyst for JATO Dynamics, an auto consulting firm, told DealBook. “Their E. V.s are still very expensive. They have problems with battery production.”Airbus is one of Europe’s great successes, having overtaken Boeing as the world’s largest commercial planemaker. (Both companies have accused the other of receiving unfair competitive advantages, culminating in a W.T.O. ruling that each of them had received preferential subsidies.)
Chinese companies have an operating edge. Labor is cheaper in Shenzhen than in Detroit or Berlin. They have built operational efficiencies and get hefty government support. And China controls the bulk of global raw materials for E.V. batteries, like lithium, which the West is frantically scrambling to source. “Chinese E.V. makers have a structural cost advantage of 25 percent,” Patrick Hummel, a UBS auto analyst, told DealBook.
Trade barriers are unlikely to slow China’s growth. “Any tariff increase will have an impact, but it won’t deter them from arriving,” Munoz said. “This will be a war between tariffs on one side, and subsidies on the other.”
An Airbus-type venture may face headwinds. Executives at Volkswagen and Mercedes-Benz last month said they didn’t want to see an auto trade war. Both companies have strong businesses in China, and have tried to distance themselves from a European Commission investigation into whether China is giving its domestic carmakers market-distorting subsidies. “We stand for free trade,” said Arno Antlitz, Volkswagen’s C.F.O.
