Viral Videos of Chinese EVs Fuel Envy for Cars Americans Can't Own

0:00Carol Massar:Is your multi-entity management creating more confusion than clarity? You need the Intuit ERP. Intuit Enterprise Suite. It's the AI-native ERP solution that's powerful, painless, and proven. Learn more at Intuit.com slash ERP. Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to Bloomberg Businessweek with Carol Masser and Tim Stenevek on Bloomberg Radio. As soon as this Businessweek story crossed last week, we knew we wanted to feature it on our broadcast. It's all about the viral Chinese EV videos. You've seen them, we've seen them, that fuel envy for cars that Americans cannot own, at least not yet.

0:46Gabrielle Coppola is Bloomberg News Auto Reporter. She joins us from Detroit. These Chinese brands have made inroads across many global markets, even in Mexico. They're virtually non-existent on U.S. roads thanks to wall of tariffs, national security rules, and automotive regulations. What is so great about these Chinese EVs? Well, I think the thing that's really jumping out to a lot of Americans is the price, because the prices are maybe like a third lower than what you would expect for the same product here in the United States. But, I mean, it's also, you know, just they have luxury features, you know, really fancy kind of user experience screens.

1:28You know, I mean, we have cars that have massage seats here in the U.S., but the idea is that in the Chinese cars, they're often packaged at a much lower price point. at least. But that's the there's a catch there, which is that this is people seeing cars, you know, as they're priced in China or maybe price somewhere outside China, not exactly the price that it would pay, you know, if it were in the United States. But of course, people don't think about that. They just see the value, the content, the price and they go, what the heck, you know, why can't I have this?

1:57Carol Massar:Well, what would they be priced? Let's say, you know, President Trump decides, hey, let's welcome Chinese EVs into the country. I mean, I would. Sorry, I can't see that happening. You know. Hey, he is going to the. Stranger things have happened. He's going to visit the country next month. But I mean, would he, would it, would they come in with a huge tariff? Would he put the tariff down? And with the price, though, you know, what would it be possibly, Gabby, with a tariff or with tariff? Without a tariff, would it be a lot cheaper than the American offerings? Well, probably yes. But here's the thing.

2:34There's a lot of different layers to sort of the barriers to Chinese cars. One of them is that in the U.S. we have certain environmental and safety standards that are, you know, that is administered by the Department of Transportation or the Environmental Protection Agency. And car companies spend months and months and months and maybe hundreds of thousands of dollars to make sure that cars are engineered to meet those standards. And if they cannot, they cannot enter. So, I mean, one thing people talk about is China's speed and how quickly they develop cars. Well, to be able to sell in the U.S., you have to spend months and months and months testing those cars in all kinds of climates and things like that.

3:12So the experts I spoke to said that that is part of what would increase the cost, for one thing. is just, we call it homologation, which means you just have to match all the standards. I think the other question is whether these cars would be, you know, yeah, if you're just putting on a ship and exporting it from China to the US, which again, very unlikely to happen, that would be cheaper than if they actually, a Chinese company, you know, like what we're seeing in Europe, they build a plant in Hungary or in Spain and start building cars to sell in the region. So if you do that, okay, well, then they have to deal with the United States sort of cost of labor, environmental regulations, the cost of materials.

3:53It's like China has this very unique kind of system where people always blame subsidies, but it's not just subsidies, that the entire economy is organized around production and R &D. And they have how many people, a billion people to scale to sell these cars to. So that's like a unique set of circumstances is that makes it cheaper to produce in China than anywhere else, you know, than most places in the world.

4:17Carol Massar:You know, you mentioned Europe, right? Because you can get these cars in Europe or certain parts of Europe. What about the environmental regulations there? I always feel like, you know, they have been pretty stringent on some stuff too. Are they adapting the cars or not? Am I reading it wrong? Yeah, that's a great question. Because yeah, most of the cars that we're seeing come out of China are electric or hybrid vehicles. So in that case, yeah, you wouldn't really be too worried about emissions. In fact, if you look around any country that has sort of strict emissions rules or that has kind of an aggressive climate agenda, that's almost like an invitation for Chinese vehicles to come in because they say, hey, look, you know, you buy these cars, we'll help you meet your goals.

4:59And it's also about, let's see, it's, yeah, it's basically, oh, subsidies. And, you know, Europe has gone, had subsidies and they took them away. But, Just like we had here in the U.S., the government will – up until Congress took this away last summer, you could get a$7 ,500 tax credit as a consumer to buy an electric vehicle. So a lot of countries that are doing that, supporting EVs, they're also kind of creating a glide path for Chinese cars to gain market share. When Carol and I were talking about this ahead of the interview, Gabby, Carol kind of had this great idea because we often talk about how many BYDs are in Mexico City, for example.

5:40And you can go to another country and you just see all these cars that you will not see here in the US. Can you just drive one across the border and therefore I get a BYD? I think a lot of people have had that idea. And when they did a little research, they are disappointed. So basically, yes, you could drive the car across the border, but you could never license that vehicle, have it registered and get it insured if it were not made to those specifications that I talked about earlier with safety standards. Yeah, but there are sort of like limited loopholes if you want to bring it over for a short period of time.

6:16If you're a company that wants to do R &D or bring it for an auto show or something, or if you're a dual resident, there are people like us who have, you know, especially if you go to a place like San Diego where people can buy a BYD or, sorry, buy any Chinese vehicle, go across the border, you know, short term, you could drive it around the U.S. But eventually you would not be able to – that would be a limit to that. You have to – it has to comply with U.S. regulations for you to, you know, really own it and drive it here. Hopefully you have a full charge when you get in line to cross the border there.

6:42Because sometimes that can take a while. Both ways. Range anxiety. Yeah, range anxiety. Gabby, as I was reading the story, I thought back to Jim Farley, Ford CEO. A couple of years ago, I remember this story where he had this, I think it was a Xiaomi that he drove around for like six months. He talked about it on a podcast. And everyone's like, wait, why is the Ford CEO driving this competitive car? And he loved it.

7:05Carol Massar:How did he get that? He loved it. And how did he get to do that in the US? think he can yeah yeah no like you said well like you said like i said like there are small exemptions temporary where he i think he also complained about having to give it back right it was a very candid moment you know for r &d purposes but yeah i mean he's been very vocal probably more than any other automaker i can think of auto see i can think auto ceo that i can think of he's been really vocal about how good chinese cars are and how the you know u.s automakers need to find a way to step it up to compete with them.

7:39And, you know, the story just kind of drives that home that, you know, people in the U.S. are starting to become aware of these cars, even if they can't buy them.

7:47Carol Massar:That's what's great. And that's kind of just to the heart of your story. You only have about 25 seconds left. You talk about these, you know, YouTubers and people with millions and millions of subscribers who are putting out videos. So in an annual survey of U.S. new vehicle buyers this year, one third said they consider purchasing a vehicle built in China, according to the president of research firm Strategic Vision. That's up from 18 % in 2021. So they're all putting these videos out. Americans are saying, I want one, but they can't get it. So, yeah, Gabby, we're going to have to stay tuned.

8:17Carol Massar:Yeah, Gabby Coppola, you rock. Thank you. Bloomberg News Auto Reporter. Great read. Check it out. It's on the Bloomberg and at Bloomberg.com.