As I prepared to leave for the 2024 Chongqing Auto Summit, I was filled with both excitement and a bit of trepidation. Chongqing is a beautiful city in South-Central China tucked into the mountains and inhabited by over 30 million residents. It is known for its Hot Pot, home to the Ford joint venture with Changan, and many leading Chinese automotive companies. It has been a little more than 5 years since I attended (in person) an automotive conference in China where I had a featured speaking opportunity, and frankly I did not know what to expect. The agenda for the Summit was provoking: The topics were engaging and focused on both business considerations and technology development and the list of speakers was impressive. Nonetheless, the program had a distinctively Asian-based theme. I had the benefit of, and the isolation in, being invited to speak on the U.S. perspective, including trade policies, the U.S. initiative to electrify, and what it meant for U.S.-China relations. The last time I covered the importance of U.S. and China relations in the auto industry, the world had not gone through COVID, former President Trump had only tweeted about tariffs on Chinese goods and, but for Tesla, the West had not discovered its EV ambitions. In those days, the U.S. and China were celebrating collaboration, joint opportunities and the future. Blue and Red states were actively seeking Chinese investment, and N.A. OEMs were salivating over China's growing domestic consumer market.
Five years on and the world is a very different place. My trepidation for traveling, largely fueled by a constant barrage in the media around deteriorating relations between the U.S. and China, the ramping up of trade sanctions, and the dire travel warnings issued by the U.S. State Department added to this adventure. I have travelled to China many times over the years, and even as recently as May, but this trip felt different. I was headed into the eye of the storm; the Chinese auto industry of late has been maligned for all types of wrongfulness. Whether it is allegations of technology theft, market distortions, forced labor accusations, anti-dumping, or simply fears of unloading their overcapacity of EVs on western shores, the last few years have dramatically changed the U.S.'s perspective on China and, what was once, its nascent auto industry. GM's image in China had waned and even Tesla was now playing second fiddle to BYD (Bring Your Dreams).
These realities were not lost on the attendees of the Chongqing Summit. While the intensifying U.S. and China relations were not palpable, it was obvious that the Chinese domestic auto industry seems resigned to largely side-step the U.S. market for the foreseeable future. There was a time, not so long ago, that representatives like myself were the stars of the program when it came to China outbound foreign direct investment and the U.S. market. In those days, our tool belts were full of opportunities for growth in the U.S. and Chinese suppliers, in particular, were interested in “The [North American] Show.” Today, the U.S. market is seen as less stable, filled with minefields and enemies are at the gate. No longer is the U.S. seen as the bastion of prosperity and stability for Chinese automotive companies. Instead, the Chinese OEMs are focused on other places in the world, including Southeast Asia, Central Europe, Africa, South and Central America. And, suppliers remain wary of changing U.S. policies and the acrimony that typifies our political rhetoric towards China. The U.S. cadence towards protectionism, isolationism and growing nationalism has encouraged the once unfathomable decoupling agenda espoused by some. Times have changed so dramatically that the U.S.'s recent increase on tariffs (even tariffs of 100% on Chinese EVs) is only met with a wilted smile by the attendees at the Summit.
China's EV industry clearly intends to push on with its own transition and its outbound objectives, but rather than focusing on the U.S., it will do so in places where Chinese investments have already dramatically shifted geopolitics. The transition of the Chinese auto industry, particularly in terms of its “NEVs” (our BEVs) has been nothing but remarkable. Some might argue that this could only occur with substantial government subsidies, but insiders to the industry understand this transformation has been decades in the making. Whatever the reason, China doesn't intend to give up on EVs and for China it is not a political debate, as it is in the U.S. today.
This is not to say, however, that everything in the Chinese EV industry is sunshine and rainbows – it too is struggling with price wars, extreme competition, upstarts that won't survive, legacy brands that are slower to evolve, and yes, tariffs in the U.S. and now countervailing duties from the E.U. Nonetheless, it was clear that Chinese automotive leaders in attendance at the Chongqing Summit were focused on addressing these challenges and moving forward with newer and better technologies and new ways of doing business. The focus was on what the Chinese call, “long termism” – mutual cooperation that ensured the future success of the EV industry for Chinese brands. The specter of tariffs, for the leaders of the OEMs, seemed to only re-enforce the fact that the Chinese auto industry was on the right path towards beating its foreign competition. But, Chinese automakers are not doing this alone. In fact, I was surprised to see the number of discussions around joint venturing and business collaborations ongoing throughout all of East Asia. At times, it seemed the only empty chair was that not occupied by the U.S.
It remains to be seen how Beijing responds to the increase in tariffs, but respond it will, as it has in the past. It also remains to be seen if the Chinese EV makers can weather the storm of closing markets in the U.S. and, to a lesser extent, in the E.U., but if they can, it will certainly expand the gap between China's EV industry and that of the fledging U.S. industry. When the NA auto industry has to plan around the fickle nature of politics and react to the increased cost of building EVs with fewer options, it is not hard to see that there remains challenges ahead, even with the U.S. government's incentives and subsidies. And, to the extent the industry is counting on those incentives to push the transition along, do they have the staying power that can weather 2-year election cycles? I for one am anxious to see what the next five years will bring in the U.S.'s EV transition, and yes, if or how the Chinese auto industry may factor in.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.