Speaker 1: Bloomberg Audio Studios, podcasts, radio news. I'm Stephen Carol and
Speaker 1: this is Here's Why, where we take one news story
Speaker 1: and explain it in just a few minutes with our
Speaker 1: experts here at Bloomberg. It's the biggest transformation of the
Speaker 1: auto industry in a century. The electric cars are having
Speaker 1: a moment. The demand for electric vehicles is booming worldwide.
Speaker 1: Sales of electric vehicles are projected to boom over the
Speaker 1: next few years. The heavy boom is here to stay.
Speaker 1: The massive growth in electric vehicles has come thanks to
Speaker 1: generous subsidies from governments in many parts of the world,
Speaker 1: and with it cries of unfair competition, particularly directed at China,
Speaker 1: whose subsidies range from cheap land to buying incentives. That's
Speaker 1: caused trade and diplomatic tensions with the United States and
Speaker 1: the European Union.
Speaker 2: Biden came out with his terrors from the Chinese cars
Speaker 2: going over to the US, But now the EU is
Speaker 2: sort of prepping their ters.
Speaker 1: Canada is now preparing potential new tarrisl on Chinese electric vehicles.
Speaker 2: This new range of tariffs all increases no decreases on
Speaker 2: a range of industries, including EV's.
Speaker 1: But at the same time, demand for electric vehicles may
Speaker 1: be leveling off, and the question of affordability makes subsidies
Speaker 1: all the more important. So here's why governments are desperate
Speaker 1: to defend their EV industries, and our Global Autos editor
Speaker 1: Craig Trudall joins us now for more. Hey, Greg, great
Speaker 1: to see you. How much are governments putting into supporting
Speaker 1: EV production?
Speaker 2: Yeah, the numbers, if you look globally, are staggering. But
Speaker 2: just to pick out one number in particular, and this
Speaker 2: comes recently from the Center for Strategic and International Studies,
Speaker 2: they estimated last month that China's EV sector received at
Speaker 2: least two hundred and thirty one billion dollars in government
Speaker 2: subsidies and aid from two thousand and nine through the
Speaker 2: end of last year, and that was about eighteen point
Speaker 2: eight percent of total sales in that span. So we're
Speaker 2: talking about a serious amount of money. And the other
Speaker 2: thing I think that really stuck out for me from
Speaker 2: that report was just how sustained that is? Right, We're
Speaker 2: talking about from two thousand and nine to last year,
Speaker 2: so quite a bit of time that has passed, and
Speaker 2: that helps you understand that when you read these figures,
Speaker 2: whether it's the Biden administration and all the money they're
Speaker 2: pumping into this through the IRA, whether you look at
Speaker 2: the European Union and individual countries how much they're pumping in.
Speaker 2: The reason they're doing so is because they are on
Speaker 2: the back foot as a result of the significant amount
Speaker 2: of money and sustained support that China has put into
Speaker 2: this sector.
Speaker 1: So is this about protectionism them we think about the
Speaker 1: sums of money involved or is it a push towards
Speaker 1: the green translation that's motivating governments to put this amount
Speaker 1: of money involved.
Speaker 2: I think it's both, and when you look back over
Speaker 2: many years, this is an industry that governments have been
Speaker 2: willing to protect right and for good reason. I mean,
Speaker 2: the auto industry accounts for about seven percent of total
Speaker 2: employment in the EU. Some two point four million Europeans
Speaker 2: are directly involved in manufacturing of cars and vans and trucks.
Speaker 2: The industry is something like three to three point five
Speaker 2: percent of USGDP. So you know, if you are assuming
Speaker 2: that in order for this industry to continue, it needs
Speaker 2: to go greener and it needs to electrify and this
Speaker 2: is the way forward, then you absolutely need to protect
Speaker 2: companies that are trying to make that long and costly transition.
Speaker 2: China didn't become so big overnight. It took quite a
Speaker 2: bit of money and a long period of sort of patients.
Speaker 2: And I do think that we're going to see some
Speaker 2: real sort of questions being raised as to are we
Speaker 2: throwing good money after bad. On the other side of that,
Speaker 2: you have to say, this is an industry with so
Speaker 2: many jobs to protect that if the state doesn't step in,
Speaker 2: then a lot of people are going to be out
Speaker 2: of work.
Speaker 1: What about the free market argument? Though, wouldn't it be
Speaker 1: just easier if we let the cheaper cars subsidized by
Speaker 1: China come into the market, bring down costs, more people
Speaker 1: will spend, stimulate the markets.
Speaker 2: I think there are totally valid arguments for at least
Speaker 2: being more open than we've seen some government and so
Speaker 2: you've seen the Biden administration recently announced that they're going
Speaker 2: to take tariffs on Chinese evs north of one hundred percent.
Speaker 2: That's really, really substantial. And I do think it's a
Speaker 2: case where when we talk about election politics, even in
Speaker 2: spite of that when he levels attacks against this former
Speaker 2: president Donald Trump still uses this rhetoric of this idea
Speaker 2: that Biden wants to have all of Americans driving evs
Speaker 2: and oh, by the way, they're all going to come
Speaker 2: from China, even in spite of the fact that the
Speaker 2: administration is taking such a dramatic measures to prevent that
Speaker 2: very future that Trump has warned about. So I do
Speaker 2: think that politics really comes into play here as well
Speaker 2: in terms of protectionism, and it plays well, and Trump,
Speaker 2: I think is quite honest about that being something that
Speaker 2: he's proud of that this was an observation that he
Speaker 2: has made that was right and has proven right in
Speaker 2: the sense that it plays well with voters.
Speaker 1: Yeah, because electric vehicles have been caught up in these
Speaker 1: geopolitical tensions between the US and China, as you mentioned,
Speaker 1: but the measures being used the taris, for example, those
Speaker 1: tireffs on imports of Chinese electric cars not terribly effective
Speaker 1: given that there aren't that many Chinese electric cars sold
Speaker 1: in the US.
Speaker 2: I think the terriff rate under the Trump administration went
Speaker 2: up significantly and already was prohibitive. And I do think
Speaker 2: that while there has been some flirtation among some companies,
Speaker 2: some of the manufacturers in China that do obviously see
Speaker 2: the US for what it is, which is quite a
Speaker 2: big market, and a market that not only is big,
Speaker 2: but is where more than anywhere else in the world,
Speaker 2: people are willing to pay significant amounts of money for
Speaker 2: each vehicle that is purchased. It is a really attractive market.
Speaker 2: And yet even still companies like buyd this is a
Speaker 2: company that's been lighting the world on fire lately, even
Speaker 2: they have really had trepidation before these recent measures that
Speaker 2: the Biden administration have announced about entering that market. They
Speaker 2: just don't feel like they are welcome, and I think
Speaker 2: for good reason, given where the winds are blowing.
Speaker 1: How did drivers feel about all of this? Where is
Speaker 1: demand for electric vehicles and is it on pace to
Speaker 1: replace in a big way the traditional combustion engine.
Speaker 2: I think we really got very excited over the last
Speaker 2: few years about the momentum that was seen in electric vehicles,
Speaker 2: and for the most part, even with this sort of
Speaker 2: slowdown that we've seen in the last year or so,
Speaker 2: it is the case that when people buy evs, they
Speaker 2: generally are quite happy with them. And you do talk
Speaker 2: with people who know this industry well and even just
Speaker 2: make the transition without necessarily being car buffs. They will
Speaker 2: tell you the faster acceleration if you don't have to
Speaker 2: worry about stopping for gas all the time or paying
Speaker 2: for gas that's a quite nice perk.
Speaker 1: How far away is the infrastructure from being able to
Speaker 1: provide us.
Speaker 2: That's the rub right, and also just concerns about even
Speaker 2: if the infrastructure is there, how often am I going
Speaker 2: to need it? And I do think that this is
Speaker 2: the ultimate sort of case of consumers not necessarily making
Speaker 2: purchases rationally. It very much comes from a sort of
Speaker 2: psychological aspect of do I need charging even if I'm
Speaker 2: only going to need it just a handful of times
Speaker 2: of year tops. This is generally the case that most
Speaker 2: trips are quite short, electric vehicles from more than capable
Speaker 2: of handling them.
Speaker 1: Yeah, and of course an interesting factor to consider the
Speaker 1: future of this industry as well. Craig Trudell, our Global
Speaker 1: Autos Editor, thank you very much for joining us with
Speaker 1: that explanation of the centrality of the EV industry to
Speaker 1: those trade tensions as well. Thanks to Craig Trudell, our
Speaker 1: Global Autos Editor. For more explanations like this from our
Speaker 1: team of twenty seven hundred journalists and analysts around the world.
Speaker 1: Search for Quick Take on the Bloomberg website or Bloomberg
Speaker 1: Business app. I'm Stephen Carol. This is Here's why. I'll
Speaker 1: be back next week with more. Thanks for listening.