‘China phobia’ putting the brakes on EVs

Home > Opinion > Columns

print dictionary print

‘China phobia’ putting the brakes on EVs



Lee Sang-ryeol

The author is an editorial writer of the JoongAng Ilbo.

Dark clouds are gathering over the EV market.

The U.K. has decided to put off the execution of the ban on internal combustion engine (ICE) vehicles for five more years until 2035. Sales of used cars with gasoline- and diesel-powered engines are also allowed after 2035.

In early October, the European Union (EU) launched an official investigation into the subsidies for Chinese EVs, citing apparent damages to the European EV industry from their low prices in Europe.

In the United States, the United Auto Workers (UAW) union has been on strike against the Big Three — Ford, General Motors, and Stellantis (formerly Fiat Chrysler) — for more than a month. 30,000 out of the 146,000 union members — or one out of five — are staging a protest against the three majors to demand job security and wage increase. Their strike will have a direct impact on the EV projects of the Big Three, as it will put the brakes on their investment in electric cars.

Recent developments in the U.K., the EU and the U.S. are negative to the expansion of the EV market. In the first half, the atmosphere was good. The EU passed a motion to drive out all ICE vehicles by 2035 amid the pros and cons of the transition. In the U.S., the Biden administration announced new automobile pollution limits that would require two-thirds of new vehicles sold in the U.S. to be electric by 2032. As of 2022, the share of EVs in new car sales in the U.S. and Europe was about 24 percent and six percent, respectively. The developments in both continents were a prelude to a gargantuan EV market to come.

The big picture has not changed since. But clearly, the enlargement of the EV market has hit a snag in the United States and Europe. The keywords of the headwind for electric cars are the “politicization of EVs.” In other words, EVs have become a major political issue.
 
Members of the United Auto Workers staging a rally in downtown Detroit, Sept. 15, to demand a wage increase. But their protest is also linked to their fear about losing jobs if the internal combustion engine vehicles are replaced by EVs. [SHUTTERSTOCK]


As electric cars are expensive, the working class has trouble buying them if ICE vehicles are expelled and only EVs are sold. EVs can also be easily framed as “cars for the rich.” Besides, hefty government subsidies for electric cars with taxpayers’ money can easily anger the middle class as well as the working class.

Politicians have discovered that an anti-EV position helps them get more votes. The Western media linked British Prime Minister Rishi Sunak’s decision to delay the expulsion of ICE vehicles to his domestic political need. Politico pointed out that the prime minister made the decision to narrow the Conservative Party’s double-digit gap in support behind the Labour Party.

Another reason for the emergence of EVs as a political issue is their connection to jobs. Producing EVs does not require as many workers as ICE vehicles, for they use even fewer parts than ICE vehicles. Automation is also much easier. The car industry is critical of the EU, as it provides about 13 million jobs and accounts for seven percent of the economy. Member countries of the EU are deeply concerned about an apparent reduction of their current jobs in the industry from the migration to EVs. Italy’s Transport Minister Matteo Salvini, leader of the far-right League party, called the EU ban on ICEs a “madness that would destroy thousands of jobs for Italian workers.”

On the surface, the most contentious issue of the UAW’s strike seems to be wage hikes. The union wants a 40 percent increase in wages over the next four years, while the Big Three suggested even less than 30 percent. There is a wide gap between the two. The top three U.S. carmakers invest heavily in the transition to EVs, but have not reaped fruit yet. For instance, Ford is expected to suffer $4.5 billion in losses this year alone. If the company fully accepts the union’s demand, its personnel costs will double Tesla’s, according to Ford. In that case, it will weaken not only Ford’s ability to invest in EVs but also its competitiveness.

But a trickier issue is job security. The New York Times said, “For workers, the biggest concern is that electric vehicles have far fewer parts than gasoline models and will render many jobs obsolete.” Factories manufacturing ICE vehicles have already started shuttering along with a brisk restructuring of EV and second-battery plants. A considerable number of autoworkers will migrate to new factories, but jobs will most likely be slashed in the process. That’s a typical phenomenon happening during an industrial transition. The UAW fights against their employers for job security when carmakers set up an EV factories or joint ventures for battery production.

EVs have become a key issue in the United States before the next presidential election. Former president Donald Trump criticized the Biden administration’s EV policy, claiming that abandoning internal combustion engines will prompt endless unemployment and inflation. He even said the U.S. car industry and jobs were “being assassinated” by the government.

Trump is not alone in the crusade against EVs. Republican Party’s presidential candidates like Florida Governor Ron DeSantis and former Vice President Mike Pence claim that the transition to EVs hands over jobs and national security to China who controls the production of batteries and related minerals. But if the transition is delayed, it only darkens the future of the U.S. car industry. It is also a contest between current jobs and future jobs. Biden campaign spokesperson Kevin Munoz said that if you follow Trump’s way, future jobs will move to China.

What triggered the backlash against EVs was “China-phobia,” particularly in Europe. The share of Chinese EVs was only 0.5 percent in 2019, but it soared to 8.2 percent in 2022. The European Commission expects the share to jump up to 15 percent by 2025. EU members have a strong sense of crisis that if left unattended, China will reap the fruits of their own drive to develop EVs — as epitomized by the oust of ICE vehicles by 2035 — to the demise of European electric cars.

The biggest competitiveness of Chinese EVs comes from their cheap prices. The EU is concerned that Chinese carmakers could lower their selling prices by about 20 percent in Europe thanks to the generous subsidy from Beijing. But it is unclear if the EU’s investigation of the government subsidy could lead to a punitive tariff on China-made electric vehicles. EU members not only should be mindful of China’s retaliation, but are also connected with China intricately. For instance, France is tough on China, but Germany is not. For Germany, China is not just a major export market for German automakers but also a country where Mercedes-Benz and BMW are operating joint EV factories with their Chinese counterparts.

Taking all aspects into account, the EV market fell into an ambush in major car-making countries. Nevertheless, you can’t turn the tide. Replacing ICE vehicles with EVs is unavoidable to meet the goal of achieving carbon neutrality by 2050.

And yet, the results of elections, uneven political topographies among countries, and the international hegemony war over EVs can have resounding repercussions on the market in the shorter term. As the U.S. Inflation Reduction Act shows, trade barriers will most likely be lifted even further.

Such developments are an ominous sign for the Korean economy, as they will certainly deal a critical blow to not only automakers like Hyundai and Kia but also second-battery companies. The wobbly stock prices of battery companies reflect the gloomy signs. Korea must closely watch the global politics over EVs before it is too late.


The electric vehicle behemoth

China became the largest car exporter in the world after beating Japan in the first quarter and Germany last year. At the center of the dramatic transition is EVs. China’s EV exports, including hybrid cars, accounted for 52 percent of all its car exports in the first half.
First of all, China itself is the world’s largest EV market. According to China Association of Automobile Manufacturers (CAAM), 6.8 million EVs were sold in the country in 2022. In contrast, 800,000 EVs were sold in the United States that year. What was the secret of China’s dramatic ascension to the dominant player in the EV market?
 
According to MIT Technology Review, the inflection point was the global financial crisis. In 2009, China became the largest car-manufacturing country, but the competitiveness of Chinese carmakers could not match their rivals in the United States, Germany and Japan. China turned to EVs the existing auto powers did not pay attention to. Beijing also expected the shift to help curb extreme air pollution and reduce petroleum import.
 
Once the government made the decision, China’s unique industrial policy — a massive tax cut and subsidies for the EV sector — was activated. Beijing spent a whopping $29 billion granting the subsidy and tax reduction to EV manufacturers from 2009 and 2022. The government also helped create the initial market by introducing EVs to the public transport system, including buses and taxis. Beijing doled out subsidies to foreign EV companies, too. That serves as a catalyst for major foreign players to set up massive EV production facilities in China. After a humongous EV ecosystem was established in China, the competitiveness of Chinese EV manufactures also enhanced.
 
Another advantage for China was the existence of global second-battery leaders, including CATL, and the dominance of minerals such as Cobalt and lithium hydroxide, essential ingredients for batteries. The country completed the vertical integration of raw materials, batteries and EVs from early on. — LSR


Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
s
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)