You may look at the auto industry’s current chaos in Europe and think that those problems won’t come to America. That this country is now taking aggressive steps to protect its auto market with 100% tariffs on Chinese-made EVs or a software ban that will effectively prohibit those cars from being sold here entirely. From that, you may think that it’s all problem solved—the U.S. keeps new players from China out for good.
But the truth is that these protectionist measures are temporary at best, and even the auto industry seems to get it. Or at least, the smart folks in the business do.
That leads off this midweek edition of Critical Materials, our morning roundup of tech and industry news. Also on tap today: Hyundai’s online sales program with Amazon seems to hit the skids, and another reminder that China’s auto industry is strong, but not invincible. Let’s dig in.
This week, the U.S. government instituted some of its toughest moves yet to keep Chinese cars from pouring into the U.S. market. Officially, the bans that will go into effect later this decade are predicated on national security: keeping high-tech, connected, camera-equipped cars from potentially spying or collecting sensitive data on citizens.
While U.S. Department of Commerce officials say the measures aren’t related to any other anti-China policy actions, like the earlier tariffs, it’s easy to see what’s really going on here. And that’s a plan to at the very least help the U.S. automakers (and ones operating here, like Toyota and the rest) to buy time to build cars that can compete with China.
They’re all correct here. China has a big lead on two things: batteries and software. The first is because countries like the U.S. spent decades outsourcing to China and China spent the same amount of time cornering the market on the entire battery supply chain. It’s one huge reason why so many U.S. EVs are massive money-losers: no ownership of those battery costs. The country is also a leader in-car software, as its EV makers have fully committed to the “software-defined vehicle” strategy that Tesla pioneered. Couple those advantages with extremely cheap labor costs (and often questionable labor practices, to put it diplomatically) and you get a recipe for cars that can outclass and undercut ours by a significant margin.
But if these automakers are shut out of the U.S. for a few years, that in theory gives our car companies—and the country as a whole—time to build up the local supply chain, get better at making EVs and up their collective software game.