by BYD cars offer great value at prices that beat anything from the West. This month, BYD introduced a plug-in hybrid that offers decent all-electric range and will sell for just over $11,000. How can you do that? Like other Chinese manufacturers, BYD benefits from lower labor costs in its home country, but this explains only part of its success. The fact is that BYD and other Chinese automakers like Geely, owner of the Volvo Cars and Polestar brands, are very good at making cars. They have leveraged China’s dominance in the battery industry and automated production lines to create a giant.
Chinese automakers, especially BYD, represent something new in the world. They note that China’s rise in economic complexity over decades is almost complete: Whereas the country once made toys and clothing and then made electronics and batteries, it now makes cars and airplanes. What’s more, BYD and other Chinese automakers are becoming virtually global automotive companies, capable of making electric cars that can directly compete with gasoline-powered cars in terms of cost.
That is, on the surface, a good thing. Electric cars must become cheaper and more abundant if we are to have any hope of meeting our global climate goals. But it raises some immediate and thorny problems for American policymakers. After BYD announced its $11,000 plug-in hybrid, it posted on Chinese social media platform Weibo that “the price will make gasoline car assemblers cringe.” The problem is that many of those gasoline car manufacturers are American.
Ford and GM planned an ambitious transition to electric vehicles three years ago, but quickly stumbled. Last year, Ford lost more than $64,000 on every electric vehicle it sold. Since October, it has delayed the opening of one of its new electric vehicle battery plants, and GM has failed to launch its new Ultium battery platform, which should underpin all of its future electric vehicles. Ford and GM have scored some victories here (the Mustang Mach-E and Chevrolet Bolt are modest successes), but they are not competing at the level of Tesla and Hyundai, companies that operate factories in less union-friendly states in the Sun Belt. .
Ford CEO Jim Farley recently revealed that the company had a secret development team that was building a cheap and affordable electric car to compete with Tesla and BYD. But producing electric vehicles profitably is an organizational skill, and like any skill, developing it takes time, effort and money. Even if Ford and GM now release innovative new designs, they will lag behind their competition in executing them well.
