Americans Are Open To Cheap Chinese Cars. That’s Scary For The Auto Industry

Lately, there’s been a lot of talk about the impending wave of cheap Chinese electric cars that may upend the U.S. auto market as we know it. Even Donald Trump waded into the topic recently when he predicted a “bloodbath” for American manufacturing due to an influx of Chinese vehicles. If elected, he said, he’d slap a 100% tariff on Chinese cars. 

As bombastic and controversial as that statement was, Trump isn’t totally off-base. The rapid rise of China as a global exporter of high-quality, affordable electric cars poses a real threat to established Western automakers, many of whom are just starting to get their footing in the EV game.

Chinese electric cars are known for being affordable and also high-tech. What’s more, it turns out that lots of Americans are open to buying them. 

Chinese EVs are likely coming to the U.S. soon

China has emerged as a powerhouse in the electric vehicle industry. Its homegrown automakers are selling lots of cars that are both cheap and high-quality. Industry watchers say it’s only a matter of time before those companies take aim at the U.S.

In a recent survey, the consulting firm AlixPartners asked Americans whether they’d buy a Chinese-brand EV if it was 20% cheaper than a comparable non-Chinese car. Of those who said they were very or moderately likely to buy an electric car for their next purchase, 73% answered yes. 

And yes, a discount that big is entirely possible. While EVs are still relatively expensive in the U.S., years of government subsidies and manufacturing experience have allowed Chinese companies to start producing EVs on the cheap. The BYD Seagull hatchback, for example, starts at the equivalent of less than $10,000. 

Fifty-eight percent of those same Americans who were likely to go electric said they had heard of at least one Chinese brand. BYD, the top seller of EVs in China (and sometimes the world, depending on the quarter), had the greatest awareness. 

The BYD Seagull made waves when it was announced with a sub-$10,000 starting price.

Chinese brands’ solid awareness among Western buyers, technological advantages and competitive costs all add up to a looming problem for the Fords and Volkswagens of the world, said Arun Kumar, global co-leader of the Advanced Mobility Practice at AlixPartners. China also dominates battery manufacturing. “That just makes them more formidable competitors in the future, across all markets,” he said. Moreover, younger buyers also have an even greater deal of Chinese auto brand awareness, the study showed

German, Japanese and then Korean automakers entered the U.S. market decades ago with cheap, basic vehicles and improved quality slowly over time. Chinese EV manufacturers, on the other hand, are already five to 10 years ahead of their American and European rivals, Kumar said. A lot of that is thanks to aggressive investments in the EV industry from the Chinese government. 

“That’s what makes it scary” for car manufacturers, he said. “The game is being played differently.” 

He said he thinks the Xiaomi SU7, for example, would sell well in Europe or America. The tech giant’s first car starts at under $30,000 in China and advertises a smartphone-like operating system. Nio, a startup, demonstrated a next-generation EV battery chemistry that can propel a car for a whopping 650 miles, he noted. 

The SU7 is Chinese smartphone maker Xiaomi’s first vehicle. 

Several Chinese brands have begun selling cars across Europe. But they aren’t in the U.S. yet. We do get some Chinese-made vehicles, like the Polestar 2 and the upcoming Volvo EX30, but those aren’t from homegrown brands. There’s reason to believe that China’s lead over the rest of the world will persist. And that comes down to piping hot EV demand in the country, Kumar said. 

Thirty-five percent of Americans surveyed by AlixPartners said they were very or moderately likely to buy an EV as their next vehicle. Forty-eight percent said they were likely to buy one by 2035. Those are rookie numbers compared to what’s going on in China. 

There, an astonishing 97% of respondents said their next car would likely be an EV. That voracious appetite drives greater manufacturing volumes, which in turn justify aggressive investments in keeping EV technology fresh, Kumar said. By 2035, Chinese firms could be two or three vehicle generations ahead of rivals when it comes to EV technology, he said. Western companies risk falling behind if they can’t scale up quickly. 

There are hurdles standing in the Chinese automakers’ way. Concerns about reliability, quality and the prevalence of service centers could keep U.S. buyers at bay, AlixPartners found. Geopolitical tensions are also at play. China is an adversarial nation, unlike South Korea or Japan. Hence the fiery rhetoric around huge tariffs from Trump and others. 

Two big remaining questions are how Chinese brands will enter the U.S. and how political viewpoints around them will shift over time, Kumar said. 

But at the end of the day, he told InsideEVs, “if you have a compelling product and it’s cheaper, it’s tough from an economic sense to keep those vehicles out.”

Contact the author: tim.levin@insideevs.com