“My name is Joe Biden, and I’m a car guy,” he said at Ford Motor’s Rouge Electric Vehicle Center in Dearborn, Michigan, on May 18.
“Look, the future of the auto industry is electric. There’s no turning back,” he said. “The only question is whether we’ll lead the race or fall behind.”
He’s probably right, unless the future is dominated by hydrogen fuel cell vehicles. But the same lead-or-fall-behind logic applies.
“Right now, China is leading in this race, make no bones about it,” the president said. “They will not win this race. We can’t let them.”
He also said, “We’re at a great inflection point in American history. How we handle the next four to 10 years is going to determine where we’re going to be 30, 40, 50 years from now.”
Probably right again about the inflection point. Probably wrong about the race.
How do things look right now?
Statistics for 2020 collected from various sources by Wikipedia show:
- Electric vehicle stock (cumulative unit sales): China 4.6 million, Europe 3.3 million, USA 1.7 million.
- 2020 Electric vehicle sales: China 1.25 million, Europe 1.36 million, USA 298,000.
- Share of global electric vehicles stock: China 43%, Europe 31%, USA 16%.
America is not in a race with China – not yet, anyway. America is far behind both China and Europe. One-third more electric vehicles were sold in Germany in 2020 than in America, to a population only 27% as large.
What’s the outlook? China and Europe (and Japan and Korea) are not standing still.
In China, the government has decreed that electric vehicles must account for 40% of each automaker’s sales by 2030 – eight times the 2020 average.
If that goal is reached, about 12 million electric vehicles will be sold in China in 2030 and the nation’s cumulative sales will reach 70 million vehicles. Those estimates are based on data from “China’s transition to electric vehicles” by Nancy W. Stauffer, MIT Energy Institute, November 25, 2020.
In Europe, more than 40 million electric vehicles should be on the road by 2030, according to a study by Arthur D. Little cited by Consultancy.eu. About half of new vehicles sold in Europe should be electric in that year.
What about batteries? Biden and his supporters on this issue want to build a domestic supply chain.
In 2020, the top 10 electric vehicle battery makers, their nationalities and their market shares, according to estimates from SNE Research, were:
- LG Chem/Korea (24.6%)
- CATL/China (23.5%)
- Panasonic/Japan (20.4%)
- Samsung SDI/Korea (6.0%)
- BYD/China (6.0%)
- SK Innovation/Korea (3.9%)
- AESC/China-Japan (3.9%)
- PEVE/Japan (2.1%)
- CALB/China (1.8%)
- Guoxuan/China (1.6%)
Korean, Chinese and Japanese companies accounted for an estimated 93.8% of the global electric vehicle battery market: Korea 34.5%, China 32.9%, Japan 26.4%.
With numbers like these, American companies will probably be playing catch-up for years. But a domestic supply chain already exists. Panasonic, LG Chem and SK Innovation make batteries in the United States. Panasonic works with Tesla, LG Chem with GM, and SK Innovation with Ford and VW.
An obsession with China and an urge to win the race are fine motivators, but the practical issues facing President Biden are legislating subsidies for retooling auto factories, for building charging stations and for R&D; providing manufacturing tax credits and consumer incentives; and competing with Chinese, European, Japanese and Korean automation while maintaining union jobs with “good” wages.
All in the face of Republican opposition in Congress.
Biden’s visit to Michigan was also aimed at shoring up support from the United Auto Workers and voters in a key swing state. But non-unionized Tesla is America’s and the world’s top maker of electric vehicles. How does that square with subsidies for Detroit?
On the other hand, China’s BYD (which recently produced its millionth electric passenger car at its factory in Shenzhen) makes electric buses in Los Angeles with a unionized workforce.
Another problem for Biden and the UAW is that electric vehicles have fewer parts and are easier to assemble than vehicles powered by internal combustion engines. They do not have multi-speed transmissions, fuel injectors, radiators, gas tanks or exhaust systems.
Industry sources calculate that an electric powertrain has only 40% as many parts as the powertrain of a conventional vehicle, and that an entire electric vehicle requires 40% fewer hours of labor to assemble.
Meanwhile, there is a trend – prominent in Japan, China and Korea – toward modular electric vehicles in which motors and other components are standardized across different models and auto assemblers.
Japanese motor maker Nidec, for example, supplies its E-Axle traction motor systems to eight electric vehicle models made by five Chinese and Chinese-Japanese joint-venture auto makers in China.
There is also a trend in China toward electric vehicles that can carry four passengers but cost less than $5,000. One such vehicle, the Hong Guang Mini, is now China’s best-selling electric vehicle, outselling (in unit terms) even Tesla.
So, just who do you think is going to dominate the market for electric vehicles in developing countries, where most of the world’s people live? American companies will participate but, without radical innovation, American labor probably cannot.
Note that the Hong Guang Mini is made by SAIC-GM-Wuling Automobile, a joint venture 44%-owned by General Motors. SAIC Motor, China’s largest auto company, owns 50.1%.