Chinese EV companies are on their way to crushing Tesla, and for the first time, free market advocate Elon Musk is calling for more trade barriers to keep the free market from destroying his company.
As Chinese EVs become cheaper and BYD becomes the best-selling EV in the world, Musk is asking for more restrictions to stop the growth of Chinese companies:
“If there are no trade barriers established, they will pretty much demolish most other car companies in the world,” he said. “They’re extremely good.” He also suggested the U.S. should begin making cheaper electric cars before it’s too late.
As Business Insider reported, the growth of Chinese EVs has forced American companies to rethink their strategies and set new priorities. Tesla, GM, and Ford have focused on high-priced luxury EV models, while Chinese companies have already released $10,000 cars like the BYD Seagull, making them affordable to a wider range of the population.
The growth of Chinese companies has been made possible by a series of government subsidies, as Xi Jinping wants to position China as the world’s largest electric car manufacturer. Now that the subsidies are beginning to end, growth in the country has slowed, and companies are looking to expand their operations to other countries. Still, they face challenges.
The Trump administration imposed a 25 percent tariff on imports of Chinese electric cars, which could slow the process. However, Chinese companies can avoid these tariffs by expanding their operations in Mexico and investing in its auto parts sector.
This has already begun to happen, both out of China’s interest and out of Musk’s necessity. Chinese auto-parts manufacturers are setting up factories on the outskirts of Monterrey, Mexico, to supply the next Tesla factory.
Fortune reported that Musk invited Chinese suppliers to Mexico to replicate the local supply chain at Tesla’s Shanghai factory. Musk has used batteries from BYD and other Chinese parts in his vehicles.
Parts from Mexico would be subject to fewer restrictions under the U.S.-Mexico-Canada trade agreement, and the Chinese government is in talks with the Mexican government to increase the number of parts produced in the North American country.
Meanwhile, U.S. automakers are in a race to develop a cheaper EV to compete with the Chinese. Tesla is leading the race, promising a $25,000 car by 2025, but the company has been unreliable before talking about deadlines and prices, but now Musk is fighting for his own business and fortune, fearing chinese companies would demolish his company.
