WEBVTT - Here's Why Countries Are Desperate To Defend Their EV Industries

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. I'm Stephen Carol and

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<v Speaker 1>this is Here's Why, where we take one news story

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<v Speaker 1>and explain it in just a few minutes with our

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<v Speaker 1>experts here at Bloomberg. It's the biggest transformation of the

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<v Speaker 1>auto industry in a century. The electric cars are having

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<v Speaker 1>a moment. The demand for electric vehicles is booming worldwide.

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<v Speaker 1>Sales of electric vehicles are projected to boom over the

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<v Speaker 1>next few years. The heavy boom is here to stay.

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<v Speaker 1>The massive growth in electric vehicles has come thanks to

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<v Speaker 1>generous subsidies from governments in many parts of the world,

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<v Speaker 1>and with it cries of unfair competition, particularly directed at China,

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<v Speaker 1>whose subsidies range from cheap land to buying incentives. That's

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<v Speaker 1>caused trade and diplomatic tensions with the United States and

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<v Speaker 1>the European Union.

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<v Speaker 2>Biden came out with his terrors from the Chinese cars

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<v Speaker 2>going over to the US, But now the EU is

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<v Speaker 2>sort of prepping their ters.

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<v Speaker 1>Canada is now preparing potential new tarrisl on Chinese electric vehicles.

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<v Speaker 2>This new range of tariffs all increases no decreases on

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<v Speaker 2>a range of industries, including EV's.

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<v Speaker 1>But at the same time, demand for electric vehicles may

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<v Speaker 1>be leveling off, and the question of affordability makes subsidies

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<v Speaker 1>all the more important. So here's why governments are desperate

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<v Speaker 1>to defend their EV industries, and our Global Autos editor

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<v Speaker 1>Craig Trudall joins us now for more. Hey, Greg, great

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<v Speaker 1>to see you. How much are governments putting into supporting

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<v Speaker 1>EV production?

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<v Speaker 2>Yeah, the numbers, if you look globally, are staggering. But

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<v Speaker 2>just to pick out one number in particular, and this

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<v Speaker 2>comes recently from the Center for Strategic and International Studies,

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<v Speaker 2>they estimated last month that China's EV sector received at

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<v Speaker 2>least two hundred and thirty one billion dollars in government

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<v Speaker 2>subsidies and aid from two thousand and nine through the

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<v Speaker 2>end of last year, and that was about eighteen point

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<v Speaker 2>eight percent of total sales in that span. So we're

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<v Speaker 2>talking about a serious amount of money. And the other

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<v Speaker 2>thing I think that really stuck out for me from

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<v Speaker 2>that report was just how sustained that is? Right, We're

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<v Speaker 2>talking about from two thousand and nine to last year,

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<v Speaker 2>so quite a bit of time that has passed, and

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<v Speaker 2>that helps you understand that when you read these figures,

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<v Speaker 2>whether it's the Biden administration and all the money they're

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<v Speaker 2>pumping into this through the IRA, whether you look at

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<v Speaker 2>the European Union and individual countries how much they're pumping in.

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<v Speaker 2>The reason they're doing so is because they are on

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<v Speaker 2>the back foot as a result of the significant amount

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<v Speaker 2>of money and sustained support that China has put into

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<v Speaker 2>this sector.

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<v Speaker 1>So is this about protectionism them we think about the

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<v Speaker 1>sums of money involved or is it a push towards

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<v Speaker 1>the green translation that's motivating governments to put this amount

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<v Speaker 1>of money involved.

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<v Speaker 2>I think it's both, and when you look back over

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<v Speaker 2>many years, this is an industry that governments have been

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<v Speaker 2>willing to protect right and for good reason. I mean,

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<v Speaker 2>the auto industry accounts for about seven percent of total

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<v Speaker 2>employment in the EU. Some two point four million Europeans

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<v Speaker 2>are directly involved in manufacturing of cars and vans and trucks.

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<v Speaker 2>The industry is something like three to three point five

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<v Speaker 2>percent of USGDP. So you know, if you are assuming

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<v Speaker 2>that in order for this industry to continue, it needs

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<v Speaker 2>to go greener and it needs to electrify and this

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<v Speaker 2>is the way forward, then you absolutely need to protect

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<v Speaker 2>companies that are trying to make that long and costly transition.

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<v Speaker 2>China didn't become so big overnight. It took quite a

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<v Speaker 2>bit of money and a long period of sort of patients.

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<v Speaker 2>And I do think that we're going to see some

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<v Speaker 2>real sort of questions being raised as to are we

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<v Speaker 2>throwing good money after bad. On the other side of that,

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<v Speaker 2>you have to say, this is an industry with so

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<v Speaker 2>many jobs to protect that if the state doesn't step in,

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<v Speaker 2>then a lot of people are going to be out

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<v Speaker 2>of work.

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<v Speaker 1>What about the free market argument? Though, wouldn't it be

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<v Speaker 1>just easier if we let the cheaper cars subsidized by

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<v Speaker 1>China come into the market, bring down costs, more people

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<v Speaker 1>will spend, stimulate the markets.

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<v Speaker 2>I think there are totally valid arguments for at least

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<v Speaker 2>being more open than we've seen some government and so

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<v Speaker 2>you've seen the Biden administration recently announced that they're going

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<v Speaker 2>to take tariffs on Chinese evs north of one hundred percent.

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<v Speaker 2>That's really, really substantial. And I do think it's a

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<v Speaker 2>case where when we talk about election politics, even in

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<v Speaker 2>spite of that when he levels attacks against this former

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<v Speaker 2>president Donald Trump still uses this rhetoric of this idea

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<v Speaker 2>that Biden wants to have all of Americans driving evs

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<v Speaker 2>and oh, by the way, they're all going to come

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<v Speaker 2>from China, even in spite of the fact that the

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<v Speaker 2>administration is taking such a dramatic measures to prevent that

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<v Speaker 2>very future that Trump has warned about. So I do

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<v Speaker 2>think that politics really comes into play here as well

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<v Speaker 2>in terms of protectionism, and it plays well, and Trump,

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<v Speaker 2>I think is quite honest about that being something that

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<v Speaker 2>he's proud of that this was an observation that he

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<v Speaker 2>has made that was right and has proven right in

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<v Speaker 2>the sense that it plays well with voters.

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<v Speaker 1>Yeah, because electric vehicles have been caught up in these

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<v Speaker 1>geopolitical tensions between the US and China, as you mentioned,

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<v Speaker 1>but the measures being used the taris, for example, those

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<v Speaker 1>tireffs on imports of Chinese electric cars not terribly effective

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<v Speaker 1>given that there aren't that many Chinese electric cars sold

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<v Speaker 1>in the US.

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<v Speaker 2>I think the terriff rate under the Trump administration went

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<v Speaker 2>up significantly and already was prohibitive. And I do think

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<v Speaker 2>that while there has been some flirtation among some companies,

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<v Speaker 2>some of the manufacturers in China that do obviously see

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<v Speaker 2>the US for what it is, which is quite a

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<v Speaker 2>big market, and a market that not only is big,

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<v Speaker 2>but is where more than anywhere else in the world,

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<v Speaker 2>people are willing to pay significant amounts of money for

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<v Speaker 2>each vehicle that is purchased. It is a really attractive market.

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<v Speaker 2>And yet even still companies like buyd this is a

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<v Speaker 2>company that's been lighting the world on fire lately, even

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<v Speaker 2>they have really had trepidation before these recent measures that

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<v Speaker 2>the Biden administration have announced about entering that market. They

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<v Speaker 2>just don't feel like they are welcome, and I think

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<v Speaker 2>for good reason, given where the winds are blowing.

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<v Speaker 1>How did drivers feel about all of this? Where is

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<v Speaker 1>demand for electric vehicles and is it on pace to

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<v Speaker 1>replace in a big way the traditional combustion engine.

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<v Speaker 2>I think we really got very excited over the last

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<v Speaker 2>few years about the momentum that was seen in electric vehicles,

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<v Speaker 2>and for the most part, even with this sort of

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<v Speaker 2>slowdown that we've seen in the last year or so,

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<v Speaker 2>it is the case that when people buy evs, they

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<v Speaker 2>generally are quite happy with them. And you do talk

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<v Speaker 2>with people who know this industry well and even just

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<v Speaker 2>make the transition without necessarily being car buffs. They will

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<v Speaker 2>tell you the faster acceleration if you don't have to

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<v Speaker 2>worry about stopping for gas all the time or paying

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<v Speaker 2>for gas that's a quite nice perk.

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<v Speaker 1>How far away is the infrastructure from being able to

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<v Speaker 1>provide us.

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<v Speaker 2>That's the rub right, and also just concerns about even

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<v Speaker 2>if the infrastructure is there, how often am I going

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<v Speaker 2>to need it? And I do think that this is

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<v Speaker 2>the ultimate sort of case of consumers not necessarily making

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<v Speaker 2>purchases rationally. It very much comes from a sort of

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<v Speaker 2>psychological aspect of do I need charging even if I'm

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<v Speaker 2>only going to need it just a handful of times

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<v Speaker 2>of year tops. This is generally the case that most

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<v Speaker 2>trips are quite short, electric vehicles from more than capable

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<v Speaker 2>of handling them.

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<v Speaker 1>Yeah, and of course an interesting factor to consider the

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<v Speaker 1>future of this industry as well. Craig Trudell, our Global

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<v Speaker 1>Autos Editor, thank you very much for joining us with

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<v Speaker 1>that explanation of the centrality of the EV industry to

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<v Speaker 1>those trade tensions as well. Thanks to Craig Trudell, our

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<v Speaker 1>Global Autos Editor. For more explanations like this from our

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<v Speaker 1>team of twenty seven hundred journalists and analysts around the world.

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<v Speaker 1>Search for Quick Take on the Bloomberg website or Bloomberg

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<v Speaker 1>Business app. I'm Stephen Carol. This is Here's why. I'll

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<v Speaker 1>be back next week with more. Thanks for listening.