I was listening to the Electric Viking. (Note:He is simply a YouTube with no real credentials so one should listen carefully and back check his sources. However, he does bring home real on the ground intelligence as he is from Australia and has spent some extended time in Thailand.
I found this chart on X, but was unable to track where the data came from. So again. a grain of salt or maybe a lot.
When one travels in “Not the West” the dominate car manufactures were Japan and Korea. With the Japanese having the most desirable automobiles and Toyota the most admired automobile manufacturer. In the last few years this has changed.
My guess is that long dated puts on Toyota are cheaper than any other automotive long dated puts. So while Nissan and Stellantis are likely to fail, the puts are probably relatively expensive.
While Chinese automakers may find it
difficult to make inroads into the USA and the EU, many of the non aligned countries tax all of the importers the same, they have no reason to protect Toyota are anyone else. So there is a somewhat level playing field at least inside the countries themselves. The real problem is there is little completion as the electric cars that China is selling are much less expensive to
operate than the ICE cars that the Japanese are selling.
Go look at the price of a brand new Toyota Sequoia. Over 80,000 dollars. All of the manufactures have priced themselves out of the market. The Chinese are going to kill them.
The same guy has put out pieces about Porsche SE’s pending writeoff of much/all of it’s stake in VW, and, today, a piece about how uncompetitive German labor rates are. That brings us to the same discussion we have been having in the US: given the degree of social upheaval the offshoring of decent paying industrial “jobs” has caused, we need to ask ourselves is getting a car or TV at a cheaper price worth the social cost?
It’s a hard question to answer Steve. I used to buy only American cars. My 1999 Buick Regal GS was the last American car I bought. Overall it was a very nice car. Comfortable, very nice ride, strong power. But the car was not reliable. Had it for three years: transmission replaced under warranty, power steering pump failed, heater blower motor replaced, and HVAC display went out. That is way too much to go wrong with a car in 3 years. I finally started to ask myself if the Big Three were taking advantage of my patriotism by trading my good dollars for junk cars. I bought Mazda in 2002, and Honda ever since (with last purchase being an Acura). I’ve had significantly better, more reliable cars ever since.
So yes there is a social cost to importing stuff. But the domestic stuff needs to not be crap. And that is what GM kept giving me all those years up to my '99 Buick.
My biggest issue with my Acura ZDX is that under the hood it is really a Cadillac Lyric. But, the Lyric seems to get good praise, and I really like the ZDX so far. The ride quality is excellent, it is very comfortable, and quick. Fingers crossed. Interestingly, the car I considered before I bought was a Mach-E. This does appear to be a reversal of my love of Japanese vehicles, but find me a Japanese EV that is worth buying that is not the ZDX/Prologue at the moment. At least Honda is trying. Toyota is in denial.
In countries with rising fuel prices and lower average incomes, EVs’ operational costs (charging vs. fuel) are far more attractive. EVs also require less maintenance compared to ICE cars.
Today, many of the imports are built here, and many of the big three products are imported. The Buick line is down to four models. Two are built in Korea. One is built in China. And one is built in Lansing, MI. Years, decades, ago, I envisioned a GM, where the only USian employees would be the honchos in the offices in Detroit, with all the products entirely designed and built in China. But GM advertising would still be waving the flag and saying “buy American”. I have mentioned before, the coworkers of mine, who were convinced the only thing that mattered was where “all the money went”. To them, an Ohio built Honda was foreign, because “all the money goes to Tokyo”, One of those people drove a Mexican built Ford Fusion. The other, the CFO of the company, drove a Swedish built Saab, but insisted it was American, because “all the money goes to GM”.
In the 80s, foreign automakers, fearing US domestic content laws were in the offing, started building plants in the US. Honda, Toyota, Nissan, Mitsubishi, VW all built plants here. In later years, Hyundai and Subaru have also started building in the US.
But Friedman insisted everything needs to be built where it can be built cheapest. The first color TV we had at home was a 66 Zenith console. Built in Chicago. All point to point wiring, done by hand. Cost about $700, which was probably about a month’s pay for my mom. Last year, I bought a new TV: 42" Samsung, built in Mexico. It cost $250, which was probably about two days take home pay at the last place I worked. Would the world stop spinning on it’s axis, if TVs cost five or six day’s pay, instead of 2, and were built in the US?
The problem with the movement to make it cost effective to build more things in the US, is the movement also is bringing toxic vectors of racism, religious fanaticism, and corruption.
I don’t think that is a question that can be answered with a measured data type answer.
I think a better question is, “How much of an immediate economic disadvantage is worth having a resilient domestic supply chain.
Think of it this way. Right now, best I can tell LFP battery packs (Like the ones used in the Tesla Model Y ling range) cost 71 dollars a kilowatt hour in most of “Not the west” In the USA they cost about 121 dollars a kilowatt hour at the pack level. I think most of this is due to protectionism in the USA. The rational for this is NOT jobs. It is economic independence. We simply cannot build the supply chains for batteries at 71 dollars a kilowatt hour and by the time we can the target will be less than that. Are more likely something we don’t even know about yet
Think of battery packs as the new oil. Imagine the economic disadvantage of running the USA economy on 120 dollar a barrel oil and the rest of the world running on 70 dollar a barrel oil. There will be an immediate economic cost, but there may be a value in that it forces the whole economy to be more energy efficient and the oil industry to explore more meaning the USA in war are economic conflict or disaster would be more resilient.
I do not know the answer, and am not really sure I need to know. I just need to know who is swimming naked that nobody suspects is swimming naked.
Looking at the infrastructure that China has built up from many materials scientists to rare earth production to modern manufacturing plants, winning the electric car race is not likely. Worse the ICE cars seem to be toast so not competing in the electric car business is like saying your going to compete in the buggy whip
manufacturing because you can’t compete with Ford and his new fangled assembly line.
Elon Musk acknowledged this when he pivoted Telsa to FSD and robotics. The pivot was not just a gamble on embodied AI, it was an acknowledgement that China has won the automobile race from top to bottom in the supply chain.
At some point with the USA having a growth rate of 3 percent and the “Not the west”
getting a tailwind from more economical transportation and putting up numbers that are twice that, the USA will not be the dominate economy in the world. That is a risk that must be measured against protecting the nascent electric automobile industry.
I have read that there are no US producers of flat screen displays. Aside from domestic use, a lot of military equipment uses flat screen displays. What happens in time of conflict/war?
Some years ago, someone asked a big dog at Apple, might have been Jobs, about the company building products in the US. The big dog said it would be impossible, because the supply chain and workforce with the right skills no longer exists in the US. That is how atrophied USian industrial capability has become. Qaz mentioned batteries. That probably isn’t only a matter of cheaper labor in China, but the fact that China has a well developed supply chain and workforce in place. The US doesn’t, so doing anything is a struggle.
The second issue is calculating the costs. It is easy to calculate, with precision, the cost savings by offshoring all manufacturing to the cheapest place. But the costs of a supply chain disruption, or a disruption due to a plague, or disruption due to a trade dispute, cannot be calculated as easily, because the calculator would be guessing about the probability of such an event occurring.
Then there are the costs of the concurrent waves of racism, religious extremism, and corruption, that are sweeping the country. How do you put a cost on that? Even a SWAG? And how can a SWAG compete with the easily calculated “savings” of offshoring all manufacturing?
Friedman advocated what the “JCs” wanted to hear: “run away from the US workers with decent pay and benefit packages, and snuggle up with whoever offers his people’s labor for the cheapest”. Now, we reap the crop sown 40 years ago.
I wouldn’t focus much on Friedman; globalism got a large boost after the collapse of the Soviet Union – “the end of history”. There was going to to a global order and economy, one big happy family. Of course, that also implies one global labor supply, be it in factories or call centers. Back in the 'oughts there was a paper by an economist at Harvard (whose name I don’t remember) that pointed this out and indicated it would be several decades for ‘labor equivalents’ to even out over the world.
The offshoring thing started in the 70s, if not the late 60s. I remember having a couple cassette tapes, from the late 60s, that said “assembled in Mexico, from USA components”. Fisher Radio, builder of stereo equipment in Long Island City, NY, was bought out by Sanyo, and production moved to Japan, in the early 70s. Imported Sony TVs were taking so much market share from US manufacturers that Nixon imposed an “import surcharge” on Sonys. By the late 70s, almost everything in RS was imported. The nice component audio was Japanese, The “compact” combination stereos tended to be built in Korea. Some products were from the Philippines.
It’s even worse than that due to second order and third order effects. China, especially the manufacturing areas of China, has a multiple layer supply chain that even drops to informal levels which can solve manufacturing problems MUCH MUCH quicker than any other manufacturing area, even really good ones. For example, a production line for some electronic device suddenly has an issue that the conveyor belt that brings the device from one stage to another is slipping. This slows production by 25 to 50% and sometimes stops production for an hour or two while a technician trys to fix it.
In a good production environment (USA, Mexico, Vietnam, South Korea, Europe, etc), the industrial engineer in charge will determine the problem, will place a work order, and then the work order will result in an order for parts for the repair. Then the ordering department will “rush order” the parts, and sometimes someone in the order department will call the supplier a few times to get the part(s) expedited.
In a Chinese production environment, the industrial engineer in charge will determine the problem, and then make a list of the parts needed to fix it. Then he and his employees will ask around (literally “ask around” by calling all their friends/acquaintances/previous suppliers/etc) who has the part RIGHT NOW. Then they will walk across the street, or drive down the road, or take a train somewhere, and they will PICK UP the part, bring it back to the factory, and have the staff repair the production line right then and there. They even have small places that can produce a new part quickly (via 3d printing, or via hand formed metal making, or anything else), you give them the spec for the part and a few hours later you have the part in your hands. If you’ve ever seen a production district in China, you will see hundreds, even thousands, of small (even tiny) businesses all around the factories that exist for this purpose … for the purpose of speed. It’s amazing. It’s also something that could never happen in western countries, we don’t have the culture to do things that way. Small towns used to be like that for limited things (“Hey Joey, go down to Bob’s general store and pick up a #3 carriage bolt with 2 nuts and 2 washers so I can fix my pump”), but never for large-scale production facilities. Some large scale production facilities attempted to bring that kind of thing in house by having a huge stockroom, but they found that they were stocking tons of stuff that would never be used, but would have to paid for anyway. And would be thrown away periodically because they weren’t used anymore. It because very wasteful. Small (even tiny) businesses around your production facility handle that way better (and especially way less expensive) because they can serve ALL the production facilities in the area.
And by third order, I mean that if the industrial engineer from a large production facility goes to a small supplier for a small assembly to fix the conveyor system, and the small supplier can make it, but needs a few tiny parts like custom screws, washers, L-brackets, whatever, they go to another smaller company to get those. They have screw specialists, wire specialists, materials specialists, coatings specialists, everything you can possibly imagine, all within a short distance of the large production facilities. It’s truly an amazing system. And it is the reason why China can produce stuff so much more efficiently than others.
