How China’s EV Industry Got So Big

China’s electric vehicle industry has driven itself to the center of the global conversation. Its automakers produce dozens of affordable, technologically advanced electric vehicles that rival — and often beat — anything coming out of Europe or North America. The United States and the European Union have each levied tariffs on its car exports in the past few months, hoping to avoid a “China shock” to their domestic car industries.

Ilaria Mazzocco has watched China’s EV industry grow from a small regional experiment into a planet-reshaping juggernaut. She is now a senior fellow with the Trustee Chair in Chinese Business and Economics at the Center for Strategic and International Studies in Washington, D.C.

On this week’s episode of Shift Key, Rob and Jesse talk with Ilaria about how the industry got so big, what it means for the world, and how to think about its environmental and national security impacts. Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap, and Jesse Jenkins, a professor of energy systems engineering at Princeton University.

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Here is an excerpt from our conversation:

Jesse Jenkins: I want to ask you a question that I’ve actually gotten from a couple of friends and colleagues — you know, normies, folks that don’t think about energy all the time. This is a question they’ve asked me over the last couple of weeks: Do we actually need 100% tariffs to compete? Is that where we’re at now?

So I’m curious, I mean, is this just politics? Is this just the Biden administration kind of responding to Trump’s chest-beating and anti-China rhetoric as we run up to the election here? Or is it, are we really at the point where we dug ourselves such a hole that we need not just a 25% tariff, which was the level before this — already quite substantial — but a 100% tariff in order to compete? Or to protect the opportunity for the U.S. automakers to get to those economies of scale and have time to grow?

Ilaria Mazzocco: I think that’s a good question because — look, I testified in front of the USCC last year. And you know, I brought the data, and I was like, look, theoretically, these companies have a cost advantage. They could come to the U.S. You know, a 25% tariff isn’t going to stop them.

And I made that argument, but — first of all, I didn’t think that was going to be something that was going to be a problem in nine months, but you know, that’s a different issue. But the argument, though, that was just a cost thing, right? Then there’s a whole argument of, like, what does the American consumer want? What does the Chinese producer want to do, right? What is their strategy? American consumers are very different from Chinese consumers, right? Chinese consumers are much more similar to European consumers in terms of commuting time, preference for smaller vehicles, right? Americans like pickup trucks, which — you know, I just went to China in May. I saw a lot of EVs of all kinds. I did not see any pickup trucks, right? That’s like a pretty American kind of thing. It’s not clear that Chinese automakers would be able to compete on that, right?

So I think it’s quite possible that there would be a very interested part of the American market in these Chinese EVs, especially maybe the lower cost ones — maybe urban households that want a cheaper second vehicle, or something of the sort.But is that going to take over a huge portion of the American market? Is that really going to be competition for GM, or for the F-150? Like, I don’t know, actually. I think there’s an open question there, but clearly the Biden administration didn’t want to take any chances on that.

So I think there’s also this element where we also have preconceptions of what the American consumer wants, and clearly we’re not going to put that to the test, right? We’re not going to have these lower cost EVs come into the market and maybe reshape how people approach this. And as I said before, I just don’t think it’s realistic. A world in which an American government allows, the Detroit Three to fail is just not particularly realistic. But I do worry — and I mean, I’ve said this before, that it is a game, right? It is a balance that you need to get when you’re playing with tariffs. Because when you protect an industry, you give them time, but you also need to give them incentives. And the IRA does that. But you need to give them some pressure, right?

And so I think, where’s the pressure going to come from? Is it going to come from emissions standards? Or is it going to come from competition? Clearly it’s not going to come from competition from China. Is it going to come from competition with Korean automakers or Japanese automakers? Question mark, right? We don’t know.

This episode of Shift Key is sponsored by…

Watershed’s climate data engine helps companies measure and reduce their emissions, turning the data they already have into an audit-ready carbon footprint backed by the latest climate science. Get the sustainability data you need in weeks, not months. Learn more at watershed.com.

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Music for Shift Key is by Adam Kromelow.