Asurge in Chinese electric vehicles (EVs) is sending ripples of uncertainty through Western markets. Memories of the “China shock” in the late 1990s, which saw a million American manufacturing jobs lost to Chinese competition, still linger, fuelling fears of another disruptive economic earthquake. However, before we succumb to apprehension, perhaps it’s time to view China’s EV onslaught as an opportunity rather than a threat.
Chinese carmakers have made remarkable strides in the last five years, recently claiming to have exported over 5 million cars in 2023, surpassing Japan’s total. In the EV sector, China’s prowess is undeniable, with one manufacturer selling half a million EVs in the last quarter, outpacing even the formidable world leader in this sphere. The concerns about subsidies and potential job losses are valid, yet amid this uncertainty lies the potential for a seismic shift in the automotive industry that could benefit the West.
One might argue that protectionist measures are necessary to shield Western industries from what is perceived as unfair competition. The European Commission’s investigation into Chinese cars and talks of increased tariffs in the US suggest a defensive stance. However, a more enlightened approach would be to recognise the potential gains from a steady supply of affordable, environmentally friendly vehicles. The market for cars is evolving rapidly, with EVs expected to dominate by 2035. The real challenge is not competition from China but adapting to the imminent disruption caused by the global shift towards EVs. The benefits of embracing Chinese EVs extend beyond economic considerations. While concerns about subsidies and state control exist, the prospect of more affordable EVs could accelerate the transition to netzero emissions. Cheaper cars mean more spending power for consumers, especially in times of squeezed real wages. Moreover, Chinese EVs are not just economical. They boast superior quality, particularly in smart features enabled by internet connectivity.
The West stands to gain from innovation spurred by competition, with the likes of Ford and Volkswagen racing to catch up with their Chinese counterparts. Critics may raise concerns about national security, depending on China for batteries and the potential for surveillance through EVs.
However, the answer lies in balancing strategic partnerships and maintaining a diversified supply chain. As long as Western leaders have access to vehicles made in their countries or by allies, fears of Chinese EVs posing security threats seem overstated. In navigating this new era of automotive transformation, policymakers should resist the temptation of protectionism. Instead, they should foster an environment that encourages healthy competition and innovation.
The focus should be on ensuring that Western industries remain agile and responsive to the changing dynamics of the automotive market. If China, through its subsidies, accelerates the global transition to clean energy and benefits consumers worldwide, perhaps the West’s best response is not to build walls but to welcome the winds of change.