Business
China’s highflying EV industry is going global. Why that has Tesla and other carmakers worried
The U.S.-China rivalry has a new flashpoint in the battle for technology supremacy: electric cars.
So far, the U.S. is losing.
Last year, China became the world’s foremost auto exporter, according to the China Passenger Car Assn., surpassing Japan with more than 5 million sales overseas. New energy vehicles accounted for about 25% of those exports, and more than half of those were created by Chinese brands, a shift from the traditional assembly role China has played for foreign automakers.
“The big growth has happened in the last three years,” said Stephen Dyer, head of the Asia automotive and industrials unit at AlixPartners, a consulting firm. “With Chinese automakers making inroads for most of the market share, that’s a huge challenge for foreign automakers.”
China’s rapid expansion domestically and abroad has added fuel to a series of clashes between the U.S. and China over trade and advanced technology, as competition intensifies between the two superpowers.
The U.S. has lofty goals for expanding its own EV industry. California, which accounted for 37% of the nation’s electric car sales as of 2022, aims to phase out purchases of new cars that run on fossil fuels by 2035.
Concerns about Chinese oversupply have come just as a broader slowdown in sales has hit EV makers. Tesla announced Monday that it would lay off more than 10% of its workforce in an effort to reduce costs and increase productivity.
In the company’s last earnings report in January, Chief Executive Elon Musk warned about the competitiveness of Chinese brands. BYD, China’s largest EV maker, surpassed Tesla in car sales last year.
“If there are not trade barriers established, they will pretty much demolish most other car companies in the world,” Musk said.
This year, Manhattan Beach-based Fisker Inc., an electrical vehicle startup, cut 15% of its workforce, had its stock delisted and said it might file for bankruptcy protection. Apple also recently announced an end to its long-held ambitions of making a self-driving EV.
One area in which Chinese automakers handily beat Western competitors is on price, thanks to government subsidies that supported the industry’s initial rise as well as cheap access to critical minerals and components such as lithium-ion batteries, which account for about a third of the overall cost of production.
“It always had these ingredients waiting around,” said Cory Combs, an associate director for Chinese energy policy at the consulting firm Trivium China. “It was kind of a magic moment for these things to come together.”
That enabled the success of BYD, which started producing lithium-ion batteries in 1996 and making cars in 2005.
In March, BYD cut the price of its cheapest EV model in China to less than $10,000. According to Kelley Blue Book, the average EV retail price is $55,343 in the U.S., compared with $48,247 across all vehicles.
While pricing wars have forced Chinese automakers to slash profit margins at home, they can charge more in overseas markets, further incentivizing exports as domestic growth has slowed. According to research firm Gavekal Dragonomics, demand in China has cooled due to the removal of tax breaks and an increase in the use of public transportation post-pandemic.
“There is a ton of pressure, especially if you are a smaller player, to find a market that is less competitive,” Combs said. “And every market is less competitive than China’s.”
Though 27.5% tariffs have in effect locked Chinese EVs out of the U.S. market, the fear that the cheaper models could eventually undermine American automakers has started to spread.
The Alliance of American Manufacturing warned in a February report that allowing Chinese EVs into the country would be an “extinction-level event” for the U.S. auto industry. The group also cited the risks of Chinese auto companies building facilities across the border in Mexico that could circumvent tariffs.
When the global market is flooded by artificially cheap Chinese products, the viability of American and other foreign firms is put into question
— Janet Yellen
After a trip to China in April, Treasury Secretary Janet L. Yellen expressed concerns about government-funded overcapacity in Chinese manufacturing of electric vehicles, batteries and solar panels. She noted that other advanced and emerging markets shared those worries, and compared the oversupply to a flood of low-cost Chinese steel hitting the global economy more than a decade ago.
“When the global market is flooded by artificially cheap Chinese products, the viability of American and other foreign firms is put into question,” Yellen said.
The European Union has opened an investigation into government subsidies utilized by China’s EV industry and whether such support violates international trade laws.
China’s state news agency pushed back on claims of overcapacity in an April article, which said exports accounted for 12% of China’s EV sales last year. It attributed the industry’s success to competitive pricing and technology, rather than government subsidies.
After meeting with German Chancellor Olaf Scholz in April, Chinese President Xi Jinping decried protectionism in other countries and said Chinese EV exports have helped ease global inflation and combat climate change.
How the U.S. is addressing the emergence of China’s EV dominance has already become a hot-button issue for the presidential election in November.
President Biden has encouraged the domestic expansion with the passage of the Inflation Reduction Act, which includes electric vehicle tax credits for U.S. manufacturers, but not if they are sourcing minerals and materials from “foreign entities of concern,” such as China. Meanwhile, presumptive Republican nominee Donald Trump has claimed electric car manufacturing will reduce auto industry jobs, and called for a rollback of the EV-friendly policies enacted during Biden’s term.
Politicians from both parties have proposed even harsher tariffs on Chinese-made EVs should they try to enter the U.S. market, prioritizing the protection of U.S. jobs over goals to reduce carbon emissions.
“That will make it even more important for Chinese companies to set up local assembly operations to minimize those costs,” said Gregor Sebastian, senior analyst at the New York-based research firm Rhodium Group. “A lot of companies are adopting a wait-and-see approach.”
Even without Chinese auto imports, the technology within the vehicles has unnerved U.S. officials. In March, Biden announced an investigation into Chinese-made “smart cars” and the data the internet-connected vehicles could collect on American users. Collaborations between U.S. companies and CATL, the Chinese battery-making behemoth, have also been subject to greater scrutiny as tensions between the two countries have worsened.
But China has spent decades cementing its status as a global leader in procuring minerals and developing critical technologies such as EV batteries while the U.S. has fallen behind. That will make it harder now for Western automakers to wholly shut out Chinese suppliers, said Tu Le, founder and managing director of Sino Auto Insights, a consulting firm.
“If automakers are going to build affordable, clean-energy vehicles this decade, the only way that happens is by using Chinese batteries,” Le said.
Free-market enthusiasts and mutual admirers Elon Musk and Javier Milei, Argentina’s new president, will headline next week’s Milken Institute Global Conference, the annual Beverly Hills confab that tackles the world’s most pressing problems with a dash of celebrity and Hollywood.
The Beverly Hilton event draws several thousand people from around the world and will kick off with remarks Monday by International Monetary Fund Managing Director Kristalina Georgieva.
Also packed into a busy program will be Milei, a libertarian populist elected in November amid soaring inflation in his country, who will speak at lunch. Musk will close out the day talking with Michael Milken, founder of the conference and its sponsor, Santa Monica’s Milken Institute think tank.
The theme of this 27th annual gathering is “Shaping a Shared Future,” a reference to finding common ground amid the complex issues that have arisen in the post-pandemic world, including war, the emergence of artificial intelligence and the need to create a sustainable economy amid climate change — employing the tools of capitalism. All public panels can be watched on the institute’s website.
“The world is in transition again,” said economist Kevin Klowden, the institute’s executive director of MI Finance. “And what you’re seeing in the U.S. right now is a huge amount of dissatisfaction. There’s this very real sense that people would like to go back to the way it was prior to the pandemic, but it’s not.”
The conference headliners — who have been described as having a bromance, with Musk hosting Milei at Tesla headquarters in April — highlight some of the challenges and possibilities of finding common ground.
Musk has warned artificial intelligence could lead to the destruction of civilization without proper safeguards, and this year sued industry leader OpenAi, which he had co-founded when it was a nonprofit before leaving in 2018. He accused it of violating its original charter in search of profits.
OpenAi Chief Operating Officer Brad Lightcap will be a featured interview Monday on one of several conference panels about artificial intelligence.
The whiskered Milei is a self-described anarcho-capitalist who has vowed to shut down Argentina’s central bank. He will take the stage just hours after Georgieva of the IMF, a global institution that is often the target of populists yet is working with his administration to help dig Argentina out of its economic hole.
Among the leading themes is sustainability. John Podesta, President Biden’s senior advisor on international climate policy, will discuss the issue with Exxon Mobile chairman and chief executive Darren Woods.
That will be followed up by a talk among Sen. Joe Manchin, a Democrat from coal state West Virginia; Chevron chairman and chief executive Michael Wirth and a top Department of Energy official.
“Up to this point, a lot of climate change has been hypothetical, but look at what you are seeing now in terms of the insurance market, wildly varying temperatures, the [flooding] pictures from Dubai. This is the new reality,” Klowden said. “There is a real understanding from the business community, the finance community, that this is something that needs to be incorporated into the future.”
As is typical, Wall Street bigwigs will opine on financial markets, asset management and other topics. The notables include hedge fund managers Bill Ackman and Ken Griffin, private equity titan David Rubenstein, hospitality magnate Barry Sternlicht, billionaire investor Ron Burkle and Wells Fargo chief executive Charles Scharf.
Hollywood panelists include Warner Bros. Discovery chief executive David Zaslav, producer Brian Grazer and Jeffrey Katzenberg. Soccer superstar and businessman David Beckham will speak on branding.
Los Angeles Mayor Karen Bass will welcome the guests while former L.A. mayor and current U.S. Ambassador to India Eric Garcetti will talk about that country’s future. Public officials on stage will include the presidents of the New York and Minneapolis federal reserve banks and Mandy Cohen, director of the Centers for Disease Control and Prevention, one of multiple panelists on medicine and health, another focus of the Milken Institute.
The conference will not ignore the war in Ukraine, as well as Israel’s campaign in Gaza — which has sparked protests at UCLA, USC and college campuses nationwide — with some panels touching on the Middle East conflict by invite only and behind closed doors.
Klowden said it was important for the conference to address the Gaza conflict, especially since the institute has wide contacts in the Middle East and holds an annual summit there. However, given the sensitivity of the matter, “the fact is that nobody wants to come out and publicly say something at the global conference or anywhere else that’s going to upset everything,” he said.
The conference ends Wednesday with a concert by John Fogerty, who led Creedence Clearwater Revival and wrote the counterculture classic “Fortunate Son”— playing at one of the country’s leading celebrations of capitalism.
Allen Media Group, the company owned by TV mogul Byron Allen, is set to undergo a significant round of layoffs that will affect all divisions of the business.
“Allen Media Group is making strategic changes to better position the company for growth that will result in expense and workforce reductions across all divisions of the company,” a spokesperson said Thursday in a statement to The Times.
“Allen Media Group’s brands continue to perform well and in many areas our revenue growth has greatly outpaced the market. We are aligning these changes to drive future business opportunities and support our growth strategies in our rapidly evolving industry.”
The company did not say how many jobs would be cut.
Allen Media Group is the parent company of the Weather Channel and a number of local TV stations.
The stand-up comedian and TV producer has been making lots of headlines lately amid reports that he was among the entertainment executives looking to acquire Paramount Global.
Earlier this year, Allen made a $14.3-billion bid to purchase all of the outstanding shares of the New York City-based entertainment company — home of Paramount Pictures, CBS and other legacy brands and franchises.
But analysts and investors were skeptical of Allen’s bid for Paramount, questioning whether he’d be able to raise the funding necessary to pull off a deal.
This is a developing story.
SAG-AFTRA has tapped audience measurement company Nielsen to provide streaming data that will inform how the performers union enforces certain terms of its new contract with the top studios.
Nielsen announced Thursday that it will function as the official third-party provider of streaming viewership numbers for the Screen Actors Guild-American Federation of Television and Radio Artists. The Nielsen data is expected to complement additional viewership info supplied by the streaming giants themselves.
“New business models require new tools, and that’s why we’ve enlisted Nielsen,” said Duncan Crabtree-Ireland, chief negotiator and national executive director of SAG-AFTRA. “The information they provide will give us the means to cross-check the data streamers give us and ensure employers are fulfilling their contractual obligations to our members.”
The partnership comes several months after SAG-AFTRA reached a deal with the major studios and streamers to end the 118-day actors’ strike. As part of that three-year pact, the streaming companies have agreed to share viewership numbers with the guild.
SAG-AFTRA intends to use the data to qualify for bonuses performers employed on hit movies and TV shows streaming on Netflix, Max, Amazon’s Prime Video and other platforms. Per the contract, actors are entitled to a bonus (in addition to residuals) if their program is viewed by at least 20% of the streaming service’s domestic subscribers within the first 90 days of its release.
Twenty-five percent of the bonus pool will go to a newly created streaming payment distribution fund, which will fund streaming bonuses for additional performers.
“The rapid evolution of the media landscape and audience behaviors over the past decade has not only affected how content is consumed and measured but also greatly impacts the financial models on which the entertainment industry operates,” said Karthik Rao, chief executive of Nielsen.
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