I am an automotive components supplier and I’ve always wondered how automotive giants are staying open or even turning any profit at all (1)
Between this, Nissan and a dozen others, I guess there’s a lot of running-on-debt going on.
1: it’s so difficult with the latest round of laws making a very high level of ADAS mandatory. Huge spend in R+D, particularly software and vertical integration, and then again huge spend on the physical car electronics.
It helps markets like US and Canada have essentially banned competition from Chinese car makers and tightly controlled automotive trade in general from many other countries.
Well for a start Norway is not in the EU and therefore does not have tariffs on Chinese EVs, so would not expect any impact in that part of Scandinavia at least.
Also the tariffs are higher on pure EVs. Plugin hybrids have a lower tariff. As a result, BYD plugin hybrid sales are growing faster than pure electrics in the EU:
I think the Chinese are losing money with the tarrifs but trying to get market share and the plan around tariffs is bringing assembly to Europe like all the other carmakers have to in order to work around the tarrifs.
If there were no tarrifs you would see a flood of cheap EVs around you - like 10k€ city cars.
The EU tariffs are based on the portion of cost they calculated to be state aid. Ensuring fair competition.
We can always debate exactly how fair it is, and if the European companies would be forced to become better if competing without a tariff shielding them.
But the EU tariffs are nothing like the 100% tariff Biden instituted to completely shut Chinese cars out of the American market.
In my country China has been selling cars below market value (for years now) to basically run everyone else out of business. I don’t think it’s anything to do with being cheaper to build and more to do with they’re selling at a loss, which they don’t care because centralised government, and a smart one at that, and then playing the long game waiting for all local manufacturing to go bankrupt before they hike the prices.
A UBS teardown estimated the BYD Seal’s (premium version) gross margin at roughly 16%. These cars are selling for $50k in Thailand. These data points suggest BYD is leveraging vertical integration, not selling the Seal at a loss.
I used to think the same way until this year on a trip to Asia. I was genuinely surprised by the range of new Chinese cars. Not just the low-cost models, but truly impressive, high-end vehicles with super innovative designs. I am very pro local manufacturing. But as a builder at heart, I have to admire the builder innovation energy coming out of Chinese auto companies. This wasn't just centrally planned... Its clear innovation.
At end of the day, Chinese companies still have to compete with each other which drives price down (so much so that CCP recently stepping in to try to make it less cut throat). Granted strategic industries like auto that eventually coalesce into oligopolies might coordinate / collude to set prices better, but IMO PRC manufacturing is too big for that - 20 country sized provinces trying to build their own champions. What we have seen is PRC companies start climbing value chain, i.e. anker going from entry to premium tier, but every step along the way some other Chinese company comes along and fills out the low end.
You hear this argument all the time, and I'm sure there is substance to it... But I cannot help but feel that it's misconstruing reality a little.
I think the issue isn't running the established companies in the ground - EVs aren't really that complicated for new brands to bootstrap if China stopped their subventions... It's where these cars are being produced, and that's already China for almost everything, or am I wrong there?
Seriously, if China wanted to ruin these companies it could just pass a legislation that makes production for $established_brand impossible, and that company would be hard pressed for years to get production up and running - and I sincerely doubt they would have enough runway to get through that.
Oof, I was to imprecise in my wording, which contextualized my comment badly.
You're completely right, ICE car production can not be fully sourced to China.
I was thinking solely about EVs. It made sense to me, because that's the market China is targeting. Battery production, chip production, electric motors, smelting etc keeps getting outsourced to China. And these are the building blocks for electric cars, hence my comment. But the precise machining and assembly for ICE cars has not been moved to China at this point in time.
My point isn't really a personal insight into the industry though. ultimately, I'm merely parroting what has been covered before like with
> playing the long game waiting for all local manufacturing to go bankrupt before they hike the prices.
This strange conspiracy theory considering PRC cars sell for 40-80%+ markup vs domestic market. Struggle to think of single sector where cheap Chinese entrants have hiked prices after eliminating competition. What has happened is they eliminate competitors and prices stays low because they're good at building things cheaply, while keeping things cheap also prevents new competitors. Like they've been exporting cheap / value goods for 20+ years now. When are they going to jack up the price?
2. You're telling us that Chinese auto manufacturers sell you the exact same car models and trims cheaper than they sell them domestically? Are you sure about this?
We need to move past these debates or we’ll slip further behind. China is repeating Japan’s trajectory: early products may have been rough, but Toyota grew into an innovation powerhouse. No one questions the Prius’s impact today.
At some point, we need to stop talking about what we did in high school 10 years ago and start figuring out how to make everything we interact with better by tapping into the collective intelligence of 8 billion people.
At least in Europe, car are more expensive to make than 20 years ago, even inflation adjusted, as the EU keeps adding new and stricter regulations.
* Lower emissions, requiring more expensive engines.
* Making cars easier to recycle (but more expensive to build)
* Adding mandatory accessories for safety reasons. Here you can find an example of what that has been recently added. [1]. Nice stuff, but it doesn't come for free.
You forgot the largest factor for price increases: manufacturers positioning all models as luxury ones. All the while cutting corners on quality control. Take French ones, they went from not the most well built but affordable cars for the masses to pseudo luxury expensive cars that still fall to pieces after 5 years. Who’s gonna buy that?
Stellantis for example knew about the problem of their engine blowing up since before 2020, but they chose to ignore it. Small turbocompressed engines are or new at this point and how to make them reliable is known too.
Or take VW, cheating before 2015 so regulation is not an excuse, and since a decade most failures are parts like coolant circuits because of cheap plastic, gearboxes, and a lot of non safety related electronics features. And what is the replacement for family mmovers? Luxury SUVs or 75k€ iD Buzz.
Edit: So in short multiple things can be true: legal reasons for price increases, but also bad marketing choices.
Difficult to make a small car that has all the safety and matches the price. It is easier to justify the bigger car at its price than the smaller car, since 2x bigger car will not be 2x more expensive to make.
It's true even if you don't consider EVs. People buy more SUVs, for one thing, but a 2025 VW Golf is also larger and heavier than a 2005 Golf, which is larger and heavier than a 1985 Golf.
Compact cars in 2025 are the size mid size cars used to be a couple of decades ago.
Meanwhile, the average family size is getting smaller and smaller and the average occupancy is ever closer to 1.
Cars today are better than 50 years ago, but not much better than 15 years ago.
You must be young.
Cars used to last five years before falling apart. It helped drive the whole auto leasing industry, because nobody wanted something that turned into an old rust bucket in half a decade.
The reliable Japanese cars came in, and every marker suddenly started offering five, eight, and even ten year partial warranties.
Today, a ten-year-old car is very common. I kept mine until it was 12-years-old, and in that time it never had a breakdown. Just tires, oil changes, and many lightbulbs. My previous cars (Volkswagen, Isuzu, Ford, Ford, Mercury) had long been scrapped by then.
This is honestly tighter then you might think accounting for inflation. A 2000 1$ is 1.87$ today. 2005 seems like they should be doing a lot better since it's 1.65$ but it's not nearly as gangbusters as this comes across.
That doesn't cope with less vehicles being sold overall and inflation, even if margins on a single car have never been higher I think (at least in US).
No one is forcing you to upgrade the trim on your car. That such an upgrade is available is beneficial. For something so expensive one would hope that it is extendable and you would not have to buy a whole new car if you wanted something different.
Between this, Nissan and a dozen others, I guess there’s a lot of running-on-debt going on.
1: it’s so difficult with the latest round of laws making a very high level of ADAS mandatory. Huge spend in R+D, particularly software and vertical integration, and then again huge spend on the physical car electronics.