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Nio’s huge cash injection from local government and state-owned bank in 2020 is an example of what Western automakers are up against
by Chris Chilton
October 8, 2023 at 13:49
The EU has opened an investigation into whether Chinese automakers have received state aid that gives them an unfair advantage over Western carmakers. Which seems about as pointless as the 2015 study that set out to find whether the Mexican drug war increased homicide rates.
But a new report in the New York Times lays bays exactly how much of an advantage Chinese firms have when it comes to pricing their cars. The standout stat in the article is that Nio loses $35,000 on every car it makes. No wonder European automakers and regulators are worried.
American automakers are already protected to some degree in their home market from Chinese competition by import tariffs. But if China’s car companies like Nio can sustain those kind of losses and still keep powering forward, at least for now, then America should be every bit as concerned as its allies in Europe.
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Related: China Lashes Out And Warns EU Of Consequences For Possible EV Tariffs
The Times reports that backing from the Chinese government enables firms like Nio to keep growing, despite losing money. It says that when Nio came close to running out of cash in 2020, the local government pumped in $1 billion for a 24 percent stake in the firm, which was topped up by a further $1.6 billion from a group led by a state-controlled bank. Not all Chinese automakers are losing money though; BYD tripled profit to $1.5 billion in the first half of this year, the NYT reports.
More: NIO Debuts The World’s First Car-Specific Smartphone
Companies like Nio are also able to build cars for far less outlay than Western brands require. The average worker at a Chinese car factory earns $30,000, which is close to a quarter of what unionized American auto workers receive in pay and benefits, and when researchers performed a teardown on a BYD Seal EV they estimated it cost at least 35 percent less to make than a Europe-built VW ID.3. Chinese firms are also at the cutting edge of battery technology.
Japan’s takeover of the entire motorcycle industry in the 1960s and 1970s, and the American car market in the 1980s and 1990s, seemed brutal at the time, but with the might of the Chinese state behind one side, the coming EV war is going to make those years look like a tea party.
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