Chinese electric vehicles in Latin America

 

Flashy, cheap Chinese electric vehicle models are arriving in many markets around the world, causing Western governments to worry about the damage they could do to their own auto industries and even their industrial bases. Such is the concern that this week Canada joined the U.S. and the European Union in imposing tariffs on Chinese electric vehicles. These vehicles also arrive in Latin America.

For the West, the fear is that Beijing is unfairly propping up its electric vehicle sector with an avalanche of subsidies. There is some truth to this. According to a recent study, China's electric vehicles benefited from at least $231 billion in government funding and support from 2009 through the end of last year. But while generous financial support certainly helped, many other elements drove the industry, including vision, timing, entrepreneurship, and the competition that drives innovation.

They were able to anticipate and understand where the market was going better than their Western competitors, not without official support, of course. They resorted to a well-known Chinese trick, inviting other foreign innovators to stimulate the curiosity of the Chinese market and leverage the supply chain abroad. In this case, it was Tesla in 2019, one of those who helped the Chinese become their most deadly competitor, not without some short-term benefits.  The electric vehicle supply chain along the Yangtze River has been the most notable result.

The U.S., EU and Canada may hope that tariffs will protect their electric vehicle industries to compete with China on price. However, with a booming electric vehicle market in China, Chinese battery manufacturers are the giants of the industry. In the first four months of this year, just two companies in the country (Contemporary Amperex Technology or CATL and BYD) already have more than half of the global EV battery market.

More importantly, Chinese manufacturers also dominate the battery materials supply chain. For countries like the United States that want to break China's dominance in future automotive and energy technology, the only hope would be a scientific breakthrough that could redesign the battery supply chain with different materials and components. The new technology would not replace the existing lithium-ion batteries that have been around for five decades, but it could provide options.

Latin America is simply curious about the models and asking for investments. In terms of markets, Latin America is not so important, but China is betting on the region not only as a supplier of raw materials, but also as a market and a manufacturer. Brazil and Mexico would be first in line for the latter, but everything will depend on Latin American demand and the ability of their governments to support that demand. There is no optimism in this regard, however, because the Chinese see this not only as an automobile, but also as a tool for integrating two prosumer spheres: energy conservation and generation, and telecommunications. All wrapped up in an electric car. It may be limited to a small upper-middle class or affluent niche, but it's a start.