What kind of books will be written about the current crisis? And what will they be called? If history and the current industry headwinds are any indication, the answer is probably something along the lines of “Should Have Seen It Coming: How the United States Lost the Last of Its Automobile Industry to Asia.” As Stephen Ezell, the I.T.I.F. economist, noted in a trio of white papers published this year, manufacturers in Korea, Japan and China now dominate large parts of the global car business.
For the time being, China is being held back from the U.S. market courtesy of a 100 percent tariff on its E.V.s. But Mexico imposes no such tax on the Chinese, and new data indicates that around 15 percent of new cars sold in that country are made by the likes of BYD and Geely, another Beijing-based automotive powerhouse. (“If you see a new car on the road here now, it’s likely to be Chinese,” a Mexican analyst recently told The Financial Times. “We clearly haven’t reached the peak.”) This spring, 2,900 Chinese E.V.s landed at a port in Canada, where the government has lowered the tariff on the imports to 6.1 percent. In the next five years, the country could import as many as 70,000 more.
It may be true, as Musk once warned, that if “trade barriers” were not established against Chinese E.V.s, BYD and Geely would “pretty much demolish most other companies in the world.” But our neighbors seem less concerned, and it’s a short drive from Mexico to the United States, as evidenced by the flood of social media footage of influencers carting their sleek new BYD sedans over the border. Even if more restrictive measures, like a proposed bill in Congress that would fully ban Chinese imports in the United States, were to pass to the president’s desk for signing, China would still be able to exercise free rein in the rest of the globe. (In June, Polestar, an E.V. company owned by Geely, was informed by American regulators that it could no longer sell new cars in the United States.)
And as companies like BYD build more vehicles, refining battery life and efficacy, they would steadily improve on an economy of scale. “They’ll be able to innovate more rapidly and keep costs down,” Ezell told me. “Then there’d be us, over here in Fortress America,” warding off the Chinese but not other Asian manufacturers. “You also need to think about the side effects of protecting yourself from China,” says Jensen, the University of Texas professor. “Yeah, you preserve a bit of your market for now, but what happens to the products we make? Are you going to want to go out, in 10 years, and buy a new Ford or G.M. truck that has been completely shielded from real competition? Maybe not.”
The “fortress” approach would leave the American auto industry isolated in more ways than one. Left with masses of trucks and S.U.V.s unappealing to the rest of the world, and reliant on domestic sales of gas-powered vehicles, Detroit would inevitably be forced to shrink further. And this time around, Washington might not come riding to the rescue. “I don’t know exactly who is going to be part of Detroit 10 years from now,” Case says. “But I don’t think it’s going to be the same as the companies that are here now.”
