I want legacy EU/US automakers to pull their heads out of their a* and compete, but anyone who thinks BYD is succeeding only on CCP support is a clown. It's a real company that's brutally demolishing the competition.
(I have a Tesla, but looking at the market, my next car might be a BYD minivan unless someone finally BUILDS A DOMESTIC FULL EV MINIVAN FFS).
> BYD is succeeding only on CCP support is a clown.
their success is an outcome of a brutal competition in the past, orchestrated by the CCP. They're now obviously no longer "helped" by the CCP, but this company (and other companies, which might've died already) were definitely recipients of state support in the early days.
The current crop of ICE car manufacturers in the west did not see it coming, and assumed they'd always have a dominant position. They deserve to lose. However, in the event of a war, this sort of loss would've had huge impact on the industrial capacity of the US, and might directly lead to a loss.
The loss of industrial capacity for ship building in the US is already evident. Back in WW2, it's due to the US's shipbuilding (look up liberty ships) that allowed the logistics to sustain the war and ultimately win. It's due to having the car factories being available to convert to tank factories, that allowed the US to produce the masses of tanks and trucks and such required to sustain the war.
So if a WW2 scenario happens today, the US will not have such options any more. With the exception of perhaps, air power. But surely, china is not only encroaching but likely will succeed in having a domestic plane manufacturing base.
Sanctions, and export restrictions will not help. Tarriffs is only going to make cheap goods more expensive, but will not bring the manufacturing back.
As have many western companies which bailed out their automotive industries during covid and the Great recession as well as earlier instances.
The west should actually operate industrial policies more like China if the outcome is globally cost and quality competitive companies after govt supports have been removed, because it seems like after US bailouts auto companies fattened profits without improving cost quality or competitiveness
The issue is in Europe, not US. What China did was to copy what US does, except: Chinese private capital is not as strong as US, that's where the state capital comes into play. Tesla is an US company.
Europe is a very different story, the private capital is very conservative. They are not willing to gamble as US counterparts, and the states are not moving fast enough.
European countries actually had industry policies in the 60s and 70s. But countries like Korea and Japan were always going to be cheaper. The Netherlands lost a LOT of many protecting the shipyards.
US made like ~8 million cars post war, and now ~16 million.
IMO industrial base is not really issue (except shipping).
Issue is PRC with 4x more population and heavy coordination ability simply moved manufacturing dial to 11. Realistically 50, i.e. last year PRC shipbuilding produced comparable tonnage to entire 5 year US ship building program during WW2. It's not just loss of industrial capacity in some sectors, it's PRC is operating on an entirely different scale that US industry never had.
Building "back" in "Build back better" isn't enough, it has to be much "better" than US manufacturing ever was.
> ... their success is an outcome of a brutal competition in the past ...
We're in this really interesting era where it is hard to say whether the US or China has the bigger economy. There have to be enormous error bars around estimating how big an economy is since we're comparing incomparable.
Given that, hopefully there'll be some high profile discussion about what China is doing to achieve this level of success. The part I'm looking forward to will be the analysis of why very low interest rates failed to spur similar competition in the west. Where is the competition? We should have the advantage in this field, groups like YCombinator have a pretty strong track record showing that, if given the chance, private interests are great at building and navigating highly competitive environments.
Hindsight will give us a lot of information - if the automakers turn out to be uncompetitive then it will have been obvious to everyone in the field through the 2010s. Why weren't there competitors emerging in the west? I have a theory that easy credit encourages market centralisation but it isn't obvious where to go to find trustworthy commentary on the idea.
> Given that, hopefully there'll be some high profile discussion about what China is doing to achieve this level of success.
This doesn’t take more than about 30 seconds of review. The CCP is making long term bets and demanding the private sector do as they’re told. It’s been obvious for a decade that renewable energy is the future. It’s been obvious that electrification of cars is happening whether legacy manufacturers like it or not.
The west can’t see past their next quarterly earnings result, and doesn’t have the stomach to make the long term investments the CCP has demanded of their own manufacturers.
Even Ford, who by all accounts is fully invested in electrification and is all in, has started to pull back because investors aren’t ok with an investment that might take a decade to pay off.
>The west can’t see past their next quarterly earnings result,
Assuming "the west" includes the US, the biggest companies in the US have very long investment timelines, much farther than the next quarter. Tesla, whose business includes making cars, lost money for 10+ years as a publicly listed company.
It's notable that this only happened because Elon held a controlling (or near-controlling) share and pushed for long-term vision against the wishes of institutional investors, bulling them as necessary. The "long investment timeline" did NOT come from wall street.
“Wall street” is the one rewarding Tesla with a market cap almost an order of magnitude more than Toyota, even though Tesla’s net income is not much higher than Toyota’s, and Toyota moves many more cars.
“Wall street” (or “the west”) is getting far more on Tesla’s long term ability to grow net income than on Toyota’s.
This is not the time to try for simple stabs in the dark, we really should make a serious effort to understand one. The west has been trying to get renewable energy working for more than 15 years, that was the strategy that has people talking about German deindustrialisation and having to read up on what the AfD's policies are. They dumped a lot of political capital into the Energiewende.
> ... because investors aren’t ok with an investment that might take a decade to pay off.
Sure. Why not? I'm happy making investments that take decades to pay off, I want to have access to machines when I'm old. What happened to all the investors who intend to live comfortably in their old age?
> What happened to all the investors who intend to live comfortably in their old age?
They got bought out by investors with shorter-term ambitions, because our economy is set up to reward short-termism, so those people end up with more capital (= market power), and this compounds over time.
Probably the problem with West are high wages and unions (especially in Europe). West could still win if it had advanced manufacturing and robotic equipment which nobody else has but this doesn't seem to be the case.
> China is not even that cheap in terms of labor anymore.
they're still cheaper than US labour. And their supply chain has proxity benefits that the US no longer has.
And the workforce is reasonably skilled now after a few decades of these skilled labour jobs (watch some YT video of how electronics are assembled there, if you want to see skill).
In cheaper production countries, you'd see similar, but china still has the edge. That's why the higher cost (compared to yester-decade) is not a factor yet, and only some of the manufacturing is being pushed out to places like vietnam, but not all.
The advantage china has is a similar type of advantage that silicon valley has for tech.
"Apart from this, with capitalist production an altogether new force comes into play — the credit system, which in its first stages furtively creeps in as the humble assistant of accumulation, drawing into the hands of individual or associated capitalists, by invisible threads, the money resources which lie scattered, over the surface of society, in larger or smaller amounts; but it soon becomes a new and terrible weapon in the battle of competition and is finally transformed into an enormous social mechanism for the centralisation of capitals."
why is the assumption that all control must be equally shared? I question the premise competely. If you made it, or invested in it, you own it. It just means that the US made, invested or invented the value that the market deems to be 40-50% of the global marketcap.
If you own and control more resources than anyone else, you can make things others can't.
But in any ecosystem where other species are growing faster than you are, its natural they will eat into your share, unless the entire ecosystem grows and creates space for everyone.
Age of Empires is a model that worked in the past when there were big difference in capabilities and information flowed much slower. Today it flows so fast, that by the time you develop capabilities to react to one thing, something new has already emerged. That doesn't mean people wont mindlessly try to control things like they did in the past. It just means they will fail, overwhelmed by the rate of change.
China is quite anti-competitive. BYD/CATL's success, which comes from their battery market dominance, is a largely outcome of the CCP's protectionism past ~10 years.
Tariffs are a 2-way street. It is very naive to presume the countries you raise tarrifs against will not enact similar tarriffs against you. And then they will do business with your competitors.
Except now you are limited to your local market, while the much larger and more dynamic global market will grow and evolve without you.
Would this work well? I mean there are many implications in devaluing USD. Would this potentially lower USD demand as a reserve currency in other countries?
US "convinced" JP, DE, FR, UK to appreciate relative to USD during Plaza Accords in 80s, those countries still got to sell cars/strategic hightech in US, just less of it. US has less leverage to "convince" PRC who has more autonomy to set their dollar peg. US unlikely to allow PRC tech regardless... sanctions/export control and all. PRC fine with devalueing alone with US to keep chipping away at RoW shares. Also consider this means PRC GDP increasing by 20-50% nominal, i.e. surpassing US band, not just on PPP terms but absolute terms.
As you said, the players involved are different, but also the context of 2020's is much different than that of the 80's.
In the late 80's you had a crumbling USSR, a bunch of secondary markets slowly opening up to global trade, and a clear sole economic superpower prevailing.
Now things are a lot less clear. The US is speakig of tariffs (which is essentially restricting themselves from a lot of global trade) while China is more than willing to make trade deals left and right. They already have a large, educated, and skillful workforce.
Sanctions/Export control work to a point, presuming they can't build up their own capabilities and do their own agreements with other countries. It is something you can do well against minor players, not as well against other powerhouses.
> Would this potentially lower USD demand as a reserve currency in other countries?
We don't know, in the 80s, the devaluation of the USD did not weaken its position as the reserve currency, will it be same this time without USSR collapsing and Gulf War?
More importantly, will the PBOC cooperate with the US like the central banks of Japan and Germany did?
I don't know the answer, but I think it won't take too long to see the answer.
Direct cash injection is frequently the worst way to do this, so I don't think that failure is particularly indicative of a complete inability to achieve onshoring of manufacturing.
Tariffs certainly seem superior to me, especially if paired with tax cuts in other areas.
tariffs seems a roundabout way to try achieve something.
Why not directly invest in making manufacturing, if the US gov't wants that specific result? The US is deeply afraid of the idea of state owned companies, coz the past red scare have put off the idea.
Of course, private industry will cry foul - that they cannot compete on the wages that would've been needed to attract the workers, etc.
I think you should not sell advanced industrial equipment, electronic parts and computers to everyone willing to pay because they can be used to produce things (including things that shoot, fly and explode). Sell only what can be used for entertainment, not for manufacturing.
For example, make an export version of GPU that has very poor precision and makes mistakes in calculations. Nobody notices if the pixels in a game are colored little wrong, but you cannot do science on such a GPU.
Also restrict export of scientific data. Keep monopoly on manufacturing things.
> their success is an outcome of a brutal competition in the past, orchestrated by the CCP. [...] this company (and other companies, which might've died already) were definitely recipients of state support in the early days.
So, like VCs do in the US.
Look, I'm not a fan of state capitalism, but you have to admit, it's way more targeted/effective than classic capitalism or corporate capitalism. I wish that countries that do not have the US money do the same.
> I want legacy EU/US automakers to pull their heads out of their a* and compete
Honestly, what can they do? Labor is very expensive here, and would be loads of pushback for a fully automated assembly line. Plus safety, taxes, and other regulations would push the price up.
US manufacturers can get within 20% cost difference which tariffs can ameliorate. That's fine. A few extra environmental and labor protections won't break everything. TSMC managed it.
But right now it's... 100% or 200%, or infinity since they simply have no models for some form factors. That's just rank incompetence.
Well there's the VW, but it's not domestic (built in Germany).
The minivan segment is shrinking again though. Sales have been dropping and most of the work van models from established companies have been cancelled. Could be room for a new entrant to make a van that people want to buy?
(I have a Tesla, but looking at the market, my next car might be a BYD minivan unless someone finally BUILDS A DOMESTIC FULL EV MINIVAN FFS).