Ask any auto industry observer what is needed to return cooling electric vehicle sales to their once-scorching growth, and you’ll get the same answer: affordable models. With too many high-priced EVs fighting for the limited number of buyers who can afford them, it seems glaringly obvious that lower-cost vehicles are the path to renewed growth.
So which automakers are stepping up to meet this challenge?
Considering how obvious the opportunity seems to be, there don’t seem to be many takers. General Motors has a few promising entries coming up, like the new Equinox EV and the reborn Bolt EUV.
But even with sales of the full-sized pickups on which their profits rely slowing, GM and Ford are both pulling back on their EV investments in a sign that they will keep with their ancient traditions of halfhearted competition in lower-margin affordable cars.
If America cannot import those cars, it must import the policies that created them instead.
The Japanese automakers have long been cautious about EVs, and sales of their hybrids are heating up as the electric car market slows, limiting their incentive to lead the push on EVs. The Korean Hyundai-Kia juggernaut has been investing aggressively in EVs globally and continues to bring out more affordable models, but they're certainly playing it safe too with hybrids and plug-in hybrids for the U.S. market.
In theory at least, if any U.S. automaker should be leading the charge toward cheaper EVs it’s Tesla. With a huge head start on scale and technology, and a flood of competition now eating into its once-commanding share of the premium market, Tesla has both the opportunity and the incentives to broaden the U.S. EV market with a truly affordable EV. But lately, its erratic CEO says the company’s future depends entirely on its AI and autonomous driving technology rather than a major push downmarket. If the industry’s most risk-tolerant CEO and investor base won’t lead the market Tesla pioneered into a new era, who will?
This situation leaves only one other obvious source for low-cost EVs, which turns out to be the most obvious of them all: China. And if America cannot import those cars, it must import the policies that created them instead.
After decades of government efforts to create an auto industry, Chinese companies now dominate nearly every aspect of the EV business, from the battery supply chain to a host of new manufacturers battling it out in China’s brutally competitive domestic market. Due to the country’s lower incomes and transaction prices for new cars, as well as national and local government policies aimed at stimulating EV demand across the market, China now enjoys a commanding advantage in affordable EVs.
And it goes deeper than subsidies as well; years of intense internal competition and a laser focus on battery tech have made many Chinese EVs legitimately good, and not just dirt-cheap.
Indeed, China is currently facing an oversupply of EVs as up-and-coming automaker growth plans collide against a broader slowdown in the economy that is beginning to affect consumers. On paper, at least, China’s overabundance of affordable EV makers looking beyond the domestic market in search of growth, and the U.S.’s need for affordable EVs and dearth of automakers eager to fill it, are a match made in heaven.
Standing in the way of this potential union of supply and demand, however, are formidable political obstacles. Where once the mainstream of both Democratic and Republican parties supported free trade, a new protectionist American consensus takes a particularly dim view of communist China.
This is especially true when it comes to electric vehicles, which the Biden administration has framed as an arena for strategic competition between the U.S. and China. With the administration slapping hefty tariffs on Chinese EV imports and pressuring China to limit incentives for Chinese EV factories, the prospect of China solving America’s low-cost EV problem seems dim.
It’s not as if the U.S. is taking this completely lying down. Recent incentives under the Bipartisan Infrastructure Law and Inflation Reduction Act have not only added tax credits for EVs, but are spurring the growth of local battery plants, North American EV factories and even DC fast-chargers.
But China’s lead remains formidable, and every day we get more and more of a sense that automakers are blinking when they stare into the abyss of huge capital costs and uneven sales figures.
In the absence of leadership from domestic automakers, there aren’t many obvious alternatives to Chinese competition as a way to reinvigorate America’s market-driven electrification strategy. Though policies encouraging a U.S. battery supply chain are warranted, historical precedents suggest that limiting the American market’s access to superior vehicles rarely leads to great outcomes. Indeed, the parallels between our current predicament and the “import invasion” of the 1980s and '90s are worth considering.
Tesla, living off its steadily declining market share and recording stock-pumping profits instead of investing in its product lineup, cuts a remarkably similar figure in today’s EV market to the GM of the time. By the early 1980s, Japan inspired broad competitive anxieties in the U.S. just as China does today, felt most acutely in the auto industry where the newcomer’s investments in new technologies fueled their dramatic ascent. Though American competition with Japan never quite reached the level of vitriol and geopolitical saber-rattling we see between the U.S. and China today, it’s easy to forget how threatening Japan’s remarkable lead in technology and economic power once seemed. It seems unfathomable today that Toyota would put GM out of business or absorb it entirely, but that fear was once very real.
Nearly every Honda or Acura sold in the U.S. is made here too. Should we start considering a reality where the same happens with BYD?
The initial political impulse to limit imports of Japanese vehicles did nothing to blunt America’s demand for them, but only raised prices and profits that Detroit promptly blew on stock-pumping gimmicks rather than technological progress. And it led Toyota, Honda and Nissan to bypass tariffs by building the vehicles they sold to Americans in America, creating robust manufacturing segments here and over one million jobs. Ultimately, the answer to the Japanese threat was not to reject its superior products, but to embrace them.
Though currency fluctuations and other factors did much of this work without the need for more coercive policy, it was a successful strategy in that it aligned the interests of the rising automotive powers with American jobs and prosperity. These days, nearly every Honda or Acura sold in the U.S. is made here too, at one of its 12 manufacturing plants across the country. Entire towns in Ohio exist because of that one company alone.
Should we start considering a reality where the same happens with BYD?
Though the Detroit automakers continued to struggle for decades after the Japanese automakers came to America, and ultimately needed a bailout to survive, in the long run, the competition had a salutary effect on them. Rather than disappearing, the strategically important American industrial base was actually strengthened by the Japanese “invasion,” as localization created fresh demand for Detroit’s abused suppliers.
In the end, the Japanese companies became deeply embedded in American life in largely positive ways, their products raised the bar for American consumers, and a new era dawned from a once-bleak “post-industrial” pessimism. And executives out of Detroit now will tell you that their lineup of products, the best-built in American history, certainly became that way out of increased competition.
There’s no guarantee that this exact outcome might be achieved by allowing Chinese automakers into the U.S., and there are some very real differences between the two scenarios. Because China and the US are strategic competitors in ways that the U.S, and Japan weren’t, there are very real concerns around issues like security, data privacy and intellectual property that would need to be addressed.
Most importantly of all, any policy giving Chinese automakers access to the U.S. market must be managed such that they provide competition on the consumer side without undermining America’s industrial base. The current round of EV tax credits, which require U.S. assembly and battery components for qualifying vehicles, already provide a template for threading this needle.
But history shows that this needle can be threaded. Having made access to its own auto market contingent on partnering with domestic firms to accelerate their industrial development, China could scarcely complain about similar conditions being put on its own firms seeking access to America’s potentially vast affordable EV demand.
Perhaps if we allowed Chinese firms to sell to American buyers in exchange for joint-venture development of a local battery supply chain, as well as local production, a similar era of mutually beneficial growth might result. In other words, if GM had to partner with a Chinese automaker in China, that company needs to partner with GM if it wants to operate here; turnabout is fair play, you might say. It’s even possible that such collaboration, and a deeper intertwining of our two auto industries, could help reduce the risk that economic competition leads to actual conflict between two of the world’s leading powers. And it may be the only way for the Chinese automakers to find an easier road into the world’s second-biggest car market, now or ever.
Such a grand bargain would not be easy to strike, and there are no guarantees that American consumers will flock to cheap Chinese EVs the way they did to Japanese cars—though studies have shown younger people are more into it than you’d think. If American policymakers won’t even consider the possibility, the alternative appears to be accepting a fundamental failure of the market-based approach that has guided electrification policy for more than a decade. As politically unpalatable as Chinese competition may be, a new wave of deeper government intervention required to pick up where market forces are failing to drive progress would not come without political risks either.
Ultimately, China’s success at establishing a robust EV industry and market presents a profound critique of U.S. policy, showing that deliberate measures to drive specific policy goals is better than hoping that minor interventions are enough to keep market forces aligned with electrification policy goals.
Either we learn from China and take steps to emulate the robust, strategic policies that have delivered such success, or we allow their up-and-coming automakers to introduce the competitive forces needed to reinvigorate our market-based strategy.
Challenging as they are, either of those alternatives is vastly preferable to wasting any more time on the blind hope that affordable EVs will simply happen without any further effort. We already know where that gets us.
Ed Niedermeyer has been covering and commenting on the auto industry and mobility technology since 2008. He is the author of Ludicrous: The Unvarnished Story of Tesla Motors, cohost of The Autonocast, and host of the Ride AI podcast. You can find him on Threads at @e.w.niedermeyer and on Bluesky @niedermeyer.io.
Artwork: Sam Woolley for InsideEVs
