Commentary
China’s BYD is the world’s biggest electric vehicle (EV) maker by number of cars sold. According to a Nikkei report published on Feb. 14, a BYD subsidiary expressed “eagerness for a plant” in Mexico.
BYD is looking at the northern Mexican state of Nuevo León for a possible site, close to the Texas border and a straight shot to San Antonio via Highway 35.
The Wall Street Journal reported on Feb. 16 that sources claim that BYD would “consider” exporting to the United States from its planned factory in Mexico. That’s an understatement. BYD can barely contain itself over the prospect of selling in the United States, the second-largest vehicle market in the world after China itself.
There are serious national security implications to admitting into the United States billions of dollars worth of cheap Chinese cars. They could further harm the U.S. auto industry, thus hurting the U.S. economy, tax revenues, and the military. Simultaneously, expanded BYD sales would enhance China’s economy and tax revenues, therefore funding the United States’ greatest military adversary.
In October 2023, Europe initiated a probe into China’s EV subsidies. The United States could do the same in the near future. Either probe could result in increased restrictions on China’s exports. But Washington and Brussels are reacting in slow motion based on liberal economic attitudes to trade with China that never should have continued after its 1989 Tiananmen Square massacre.
Cars from Japan in the 1970s and South Korea in the 1990s were a one-two punch against the U.S. auto industry. They were our allies, but China’s communist regime is an adversary or worse. If the embattled U.S. industry is again hit by cheap imports—most imminently BYD EVs that sell for as low as $11,000 in China—the results could be disastrous. As Elon Musk said in January, without trade barriers against Chinese cars, they will “pretty much demolish most other car companies in the world.”
Mexican labor costs far less than U.S. labor, which faces unsustainable risks from a wave of United Automobile Workers of America (UAW) strikes last year. Higher wages for UAW workers are great for the very few who win them. But the strikes hurt the unemployed, bogged down free labor markets, and chilled investment in the United States because of increased costs to business, including the risk of debilitating strikes. Because of eroding conditions for manufacturing in the United States, companies are fleeing to Mexico, Vietnam, and India, where labor unions pose less of a problem.
BYD has several advantages over U.S. carmakers, including about $4.3 billion in state support over the period from 2015 to 2020; soup-to-nuts vertical integration in mining, batteries, and semiconductors; price point product differentiation; pure and hybrid EVs; and cheaper design and components made in China and Mexico.
U.S. investors who apparently care little about U.S. or allied national security or the market democracies that made them are funding BYD in its bid to outcompete automakers in the democracies. Warren Buffet was an early BYD investor with hundreds of millions of dollars. Most likely, the Chinese Communist Party will ensure that its billionaire backers make a tidy profit in the process.
In 2023, BYD sold 1.57 million pure EVs—the most of any company in the world. BYD sells in places such as the UK, Thailand, and the United Arab Emirates. In addition to manufacturing in China, BYD makes cars in Uzbekistan and plans additional factories in Hungary and Brazil, where it plans to have a lithium mine. BYD controls 43 percent of the EV market in Southeast Asia and is planning a Thai factory that will start delivering in July.
BYD’s one weakness is a stalling local market because of the faltering Chinese economy. Its subsidized EV makers, along with international rivals such as Tesla, have thrown money at obtaining market share in China, including through price wars pushing some toward insolvency. So Beijing has encouraged them to seek yet greater markets abroad rather than compete to death at home or empower their own consumers to soak up extra supply.
“China’s commerce ministry this month encouraged its EV makers to expand overseas, such as by tying up with foreign partners for research, logistics, and supply chains,” a Feb. 18 article in The Wall Street Journal reads. “Chinese auto suppliers will get credit from banks to support the push.”
There are some signs that the Biden administration will do something to stem China’s dumping of overcapacity abroad. But the United States has been saying this for years while focusing on bringing inflation down and addressing climate change. China’s overcapacity in EVs could thus be welcomed by some because it addresses both problems, not to mention reorients its industry away from more powerful internal combustion that has dual military purposes.
However, the move to Mexico by BYD is an end-run around U.S. tariffs on China. The tariffs that BYD pays on cars shipped from China, 27.5 percent, would drop to just 2.5 percent for its vehicles manufactured in Mexico. Do the American people really want to thus empower the People’s Liberation Army to develop the worst kinds of conventional, biological, chemical, nuclear, and artificial intelligence weaponry? A slightly cheaper EV is obviously not worth gambling on the United States’ future. U.S. politicians must do more to prevent the BYD deluge. Why aren’t they?
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
