China’s electric car industry is on track to swallow the world. But there’s one piece of the puzzle that often gets overblown when people discuss the ramifications of these cars potentially being sold in the United States someday.
That $10,000 BYD you keep hearing about? Here in the U.S., there’s zero chance it would be so astonishingly cheap, for better or worse. There are a few reasons for that.
EV prices have fallen in China partially due to a brutal price war that is widely seen as unsustainable. Chinese cars sold in the U.S. would also need to meet different safety standards, which would hike up costs. (The same is true in Europe, where that ultra-cheap BYD Seagull just went on sale for around 23,000 euros, with some modifications.)
The legendarily cheap BYD Seagull arrived in Europe recently as the Dolphin Surf, pictured here.
Photo by: BYD
And then there’s the biggest factor: tariffs. Today, the U.S. imposes duties of over 100% on Chinese-made cars in what amounts to an effective ban. The federal government’s line is that China’s lavish government subsidies have created far too much car-building capacity, and that it’s not America’s job to let artificially cheap imports steamroll into town.
It’s difficult to imagine those walls coming down in a major way anytime soon. And, for car companies that sell in America, it’s a lifesaver to avoid competing with cars that cost half or a third as much. But that doesn’t mean Ford, General Motors and the rest are out of the woods.
When we interviewed Rivian CEO RJ Scaringe on the Plugged-In Podcast a few weeks ago, I asked him about the threat of China’s EVs coming to America, and whether he and his rivals should be preparing for that.
“I think everyone should be planning for that and designing [their] technology stack around that,” he said. But the fixation on cost is all wrong, he argues.
“What’s alarming, if you’re looking at the whole industry, is that the technology is much better,” he said, referring to China’s EV industry. “If I was an existing manufacturer, I’d get less hung up on the cost and more focused on ‘the cars are actually better.’”
That’s the key phrase here: “the cars are actually better.” Whether China’s automakers got ahead thanks to government investments or labor costs or leveraging Western IP doesn’t matter now—it’s a question of product vs. product.
While much of the Western auto world has been talking a big game about making “smartphones on wheels” for years, China is already there. My colleague Patrick George put succinctly what he saw at the Shanghai Auto Show this year: “Tesla, but more and better.”
The cars have powerful, dazzling infotainment systems with features like karaoke and voice assistants. They have underlying architectures that often share more with the consumer electronics world than with clunky, old-school automotive systems. That means frequent and substantial software updates over time, similar to what Tesla and Rivian also do.
Chinese firms can also develop new models in months, rather than years. Some EVs can charge at incredibly high rates. On top of all that, many outsiders have said they’re built just as solidly as German luxury cars.
The best poster child for the industry may be the Xiaomi SU7, a sleek, Porsche-fighting premium sedan that Scaringe called “an impressively well-done vehicle”—high praise for Xiaomi’s first-ever car. It slots right into the electronics giant’s device ecosystem, allowing owners to, for example, switch on their car’s A/C from their Xiaomi smart speaker—or check their home security cameras right from their car’s screen.
The Xiaomi SU7’s infotainment screen integrates with other devices across an owner’s life.
Photo by: Patrick George
Rivian’s founder is far from the only auto executive to sound the alarm here. Ford CEO Jim Farley recently said China has “far superior in-vehicle technology” and that its car industry is “the most humbling thing I’ve ever seen.” Last month, Ford revealed plans for a new EV platform and manufacturing method explicitly aimed at battling China.
Scaringe went on to explain why it’s wise to remove cost from the China equation: Sure, Chinese cars might be sold in America someday, but it would never reach that nightmare scenario of a $10,000 or $15,000 BYD going head-to-head against a comparable $30,000 or $40,000 Rivian. The U.S. would never let that fly, he said.
“One of two things will happen: Either we’ll put tariffs in place that make the cost equal, or we’ll allow Chinese manufacturers to build in the United States,” he said. “But in both cases, the cost will be essentially equal.”
Rivian currently sells the R1T, R1S (pictured here) and a commercial van in North America.
Photo by: Rivian
Cars can get built so cheaply in China because of lower labor costs, much lower cost of capital and hefty government subsidies for car factories, he said. So those cost advantages largely evaporate once a firm is forced to make cars somewhere else. Moreover, if trade barriers were to magically disappear, then what would stop U.S. companies from leveraging those lower Chinese manufacturing costs, too?
“There’s no magic sauce happening in China that’s allowing the cars to be built easier,” he said. “You have a whole series of things that just lead to an overall lower cost base.”
All of that is why, Scaringe says, car companies should focus on beefing up their products and technology—not just worrying about cost.
“Who knows? In the fullness of time, I do think Chinese manufacturers may start building here. And then they’ll win not on cost, because the cost will be the same, or very nearly the same,” he said. “They’ll win on tech.”
Contact the author: Tim.Levin@InsideEVs.com
