Previously EkaLore has written about many changes in the global automobile market. Many governments seek the migration to low-emission and electric vehicles. The global stakes are high for employment, industrial structure, and technology exploitation. In this release EkaLore looks at a simple cue: invasions of existing traditional automobile manufacturers’ markets are “No Surprise”. The focus in this release are the shared assumptions, and their effects, from an Alien Invasion of traditional manufacturers markets.
For some purposes, Tesla, as an Alien Invader, can be considered a Chinese competitor (as much of the global production comes from the Shanghai Gigafactory). Tesla’s strategies and tactics of imports to gain an initial market penetration, locating production in major markets and favorable materials supplies, and using technological advantages mirrors the action a century ago of major American manufacturers. These are “No Surprise” as they are part of legacy knowledge.
Chinese manufacturers have caused alarms, and governmental actions, in the EU and USA. Governments, analysis, and competitors seemingly have no doubt of Chinese manufacturers (or joint ventures) like BYD or Geeley. The “No Surprise” assumption is the Chinese will be able to deliver EVs desirable to consumers with the technologies and attractive price points.
Protective actions follow to: advance tariff actions, counter-investment at government levels, and build defenses for favored manufacturers. The traditional manufacturers advance their case they will be better future competitors using protections to build better products and achieve cost reductions.
The mismatched assumptions are to have no doubts of Chinese manufacturers competencies while assuming traditional manufacturers will be able to meet competition with protection. Testing each assumption will take time while costing consumers and investors huge sums for only slow progress.
Chinese investors are likely to see some unit and sales growth stunted by anti-competition protections. The government-level action in response will see sales of ICE slow in China (particularly in the European luxury segments):again lowering the margins, slowing the development of technologies as investment capital decreases, and creating greater social costs in the traditional manufacturers’ home countries.
Non-Chinese Investing and constructing is forcing to: new supply-chains, materials infrastructure, and production capacity. This will be a financial reach with higher investment costs due to higher global interest rates.
In the USA traditional manufacturers, and their dealer networks, will be encouraged by governmental protections (regardless of political party) to maintain high-cost sales and service networks. The traditional market leaders will be competing with Chinese manufacturers seeking innovative and lower-cost networks unburdened by tradition.
Assumption testing will result in a high stakes competition. Traditional manufacturers are likely to be at a disadvantage of USD$5-7,000 of costs per vehicle (offset by government incentives for consumers). These result from their existing high cost structures. The testing of assumptions will also increase calls for greater protections. Meanwhile costs increase for traditional manufacturers while increasing more slowly for Chinese competitors starting from a lower base.
For more than a decade the development and preparations of the Alien Invaders have been predicted and watched. The timing and fears of Alien Invaders have seen surges and sags in automotive volumes, fundamental changes in consumer preferences, and technology developments. Years of debate close with rapid political actions by governments to protect traditional manufacturers. The time of Alien Invasion is now. All of this is “No Surprise”.
In the next release a deeper look at the unrecognized losses coming to G7 traditional markets.
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