By Hugh Holland
Governments in the EU, US, and Canada recently imposed heavy tariffs on electric vehicles imported from China. That may be the only thing that Biden, Harris, Trump, Trudeau, and probably Poilievre all agree on. A November 2 article in the Toronto Star titled “The Trouble with Tariffs” suggests that Canada should drop the EV tariff so Canadians could buy Chinese EVs at half the price of EVs made in Western countries.
That poses some serious questions. Does that mean North American and European countries should just allow Chinese companies to undercut our second biggest manufacturing base and put 128,000 Canadian autoworkers out of work? No. Does the price difference in automotive products mean Chinese workers work longer, harder, and better than Western workers? No. If Chinese imports were to sell at half the price, would auto dealers and sales and service people also cut their incomes in half? No. Would the Toronto Star cut their subscription price from $400 to $200 per year so the unemployed workers could buy a newspaper? Not likely.
Let’s take a look at some facts.
The Chinese are good people who have endured hundreds of years of internal conflict and unrest. Since the 1950s, things have improved greatly, but their GDP per capita and industrial wages are still about 25% of those of most Western countries. Many commodities, such as oil and gas, are sold at a world price, but manufactured products are more subject to direct competition.
In my 40-year career working as an engineer, manager, and executive in the Canadian division of a US auto manufacturer, I had the opportunity to visit and observe car, truck, and parts manufacturing plants at most of the auto companies in North America, Europe, and Japan. WW2 decimated the industries in both Europe and Japan, so the North Americans had a clear advantage up until 1960, after which the European and Japanese industries came roaring back. Since then, all auto companies have been able to find minor competitive advantages that are usually short-lived.
Contrary to the Star article, the first modern EV was the GM EV1 developed in 1985 to address a serious air pollution problem in Los Angeles County, California. I was personally involved in that program because there was thought to building it at an available plant in Canada. In the end, the program was shelved until suitable charging infrastructure could be built. China’s one-party government has more power to mandate the building of EVs and charging infrastructure.
China started making relatively primitive cars and trucks in the mid 1950s. By 2008, China produced more cars than any other country for its huge population of 1.4 billion people. Of course, they deserve credit for that progress, but lest they forget, they received a great deal of start-up help from US, European, and Japanese auto companies. I have close friends who worked in both China and South Korea to help those countries establish an auto industry.
Today, auto plants look much the same everywhere. The more repetitive operations of welding and painting are done by robots that can perform more consistently than humans, and the operations that require more skill and judgment are done by trained workers. The workforce includes a lot of skilled tradespeople to install and maintain the automation. Canada has all the natural and human resources needed to be fully competitive in EV manufacturing, but the massive transition will take some time. US and Canadian governments are helping, but likely less than China.
But by virtue of their population, which is 30 times that of Canada, Chinese companies have huge economies of scale for product engineering and development, and they have more vertical integration in their supply chains, but that does not translate into the 50% lower price being offered. Most final assembly plants around the world build one car per minute. The real reason for the low price is the average industrial wage in China, which is still only 25% of the average in North America and Europe. Competing with that wage would create a race to the bottom for our working people.
Working people in North America and Europe have negotiated for decades to establish a healthy and sustainable work-life balance. Average hours worked per year in western countries is about 75% of hours worked in China, India, South Korea, etc. That is reflected in the UN happiness index that shows Scandinavian countries as the happiest followed by Canada, US and other European countries with China, India, and Russia much further behind. Happy countries don’t cause trouble.
The total cost of my GM North American EV plus the energy it consumes is already less than my former similar gasoline powered vehicle. But GM is now saying that as the very heavy initial development costs are covered, the cost of the EV itself will soon be the same as gasoline-powered vehicles, and their much higher efficiency and lower energy cost will make the total cost much less.
The goal must be to mitigate climate change, and the only solution is to rapidly reduce the total amount of global emissions. The atmosphere doesn’t care where emissions come from. Replacing the world’s fleet of one billion light-duty vehicles at a global capacity of 65 million per year will take 15 years of producing 100% EVs, and we will be producing only 25% EVs globally in 2024.
“If you’re transitioning to EVs a little bit slower than the rest of the world, then you can basically forget being competitive on a global stage.” — William Roberts, Rho Motion senior research analyst
Rather than trying to weaken the manufacturing base of countries they perceive as competitors, China should do more to help achieve global climate goals by filling their own huge needs first, and then supplying EVs to the 158 countries that have no capacity to produce cars and trucks.
Hugh Holland is a retired engineering and manufacturing executive living in Huntsville, Ontario.
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The Real Person!
The Real Person!
Ev’s are a hard sell to Canadians because of cost and the fact that we don’t a have that great a system for charging the ev’s. There aren’t enough charging stations and it takes too long to charge compared to filling up at a gas station. Has anyone considered building low speed ev’s that would be used in cities and towns? I would consider buying an ev like that just for running around town. If we had a revitalized train system that ran on electricity then that would allow people to go from town to town without burning fossil fuels.
Has anyone ever calculated the environmental damage that will be caused by mining to get the minerals needed to produce ev’s? As far as tariffs on Chinese ev’s, I say just quit trading with China entirely.