In my country China has been selling cars below market value (for years now) to basically run everyone else out of business. I don’t think it’s anything to do with being cheaper to build and more to do with they’re selling at a loss, which they don’t care because centralised government, and a smart one at that, and then playing the long game waiting for all local manufacturing to go bankrupt before they hike the prices.
A UBS teardown estimated the BYD Seal’s (premium version) gross margin at roughly 16%. These cars are selling for $50k in Thailand. These data points suggest BYD is leveraging vertical integration, not selling the Seal at a loss.
I used to think the same way until this year on a trip to Asia. I was genuinely surprised by the range of new Chinese cars. Not just the low-cost models, but truly impressive, high-end vehicles with super innovative designs. I am very pro local manufacturing. But as a builder at heart, I have to admire the builder innovation energy coming out of Chinese auto companies. This wasn't just centrally planned... Its clear innovation.
At end of the day, Chinese companies still have to compete with each other which drives price down (so much so that CCP recently stepping in to try to make it less cut throat). Granted strategic industries like auto that eventually coalesce into oligopolies might coordinate / collude to set prices better, but IMO PRC manufacturing is too big for that - 20 country sized provinces trying to build their own champions. What we have seen is PRC companies start climbing value chain, i.e. anker going from entry to premium tier, but every step along the way some other Chinese company comes along and fills out the low end.
You hear this argument all the time, and I'm sure there is substance to it... But I cannot help but feel that it's misconstruing reality a little.
I think the issue isn't running the established companies in the ground - EVs aren't really that complicated for new brands to bootstrap if China stopped their subventions... It's where these cars are being produced, and that's already China for almost everything, or am I wrong there?
Seriously, if China wanted to ruin these companies it could just pass a legislation that makes production for $established_brand impossible, and that company would be hard pressed for years to get production up and running - and I sincerely doubt they would have enough runway to get through that.
Oof, I was to imprecise in my wording, which contextualized my comment badly.
You're completely right, ICE car production can not be fully sourced to China.
I was thinking solely about EVs. It made sense to me, because that's the market China is targeting. Battery production, chip production, electric motors, smelting etc keeps getting outsourced to China. And these are the building blocks for electric cars, hence my comment. But the precise machining and assembly for ICE cars has not been moved to China at this point in time.
My point isn't really a personal insight into the industry though. ultimately, I'm merely parroting what has been covered before like with
> playing the long game waiting for all local manufacturing to go bankrupt before they hike the prices.
This strange conspiracy theory considering PRC cars sell for 40-80%+ markup vs domestic market. Struggle to think of single sector where cheap Chinese entrants have hiked prices after eliminating competition. What has happened is they eliminate competitors and prices stays low because they're good at building things cheaply, while keeping things cheap also prevents new competitors. Like they've been exporting cheap / value goods for 20+ years now. When are they going to jack up the price?
2. You're telling us that Chinese auto manufacturers sell you the exact same car models and trims cheaper than they sell them domestically? Are you sure about this?
We need to move past these debates or we’ll slip further behind. China is repeating Japan’s trajectory: early products may have been rough, but Toyota grew into an innovation powerhouse. No one questions the Prius’s impact today.
At some point, we need to stop talking about what we did in high school 10 years ago and start figuring out how to make everything we interact with better by tapping into the collective intelligence of 8 billion people.
