US climate tech can’t thrive without confronting China

Infinity’s experience in the renewable energy sector holds a lesson for Western manufacturers of all stripes — but US automakers in particular: The biggest threat they face from Chinese companies isn’t just that their products are cheaper, but that they’re better. And the more they protect themselves from competition in the US, the greater the risk that they never sufficiently improve their own products to compete with China’s on the global stage.

Trade barriers like the 100% tariff on Chinese EVs the Biden administration adopted last month are ostensibly meant to give Ford, General Motors, and Stellantis time to catch up. The risk of that strategy is that the opposite happens instead. Intense domestic competitive pressure — more than 100 Chinese companies make EVs — have pushed China’s EV industry toward lower costs and higher quality; even BYD’s bargain-basement models are well-reviewed. Insulated from that competition, US automakers may choose to essentially cede international markets to Chinese competitors. In effect, by protecting its domestic car makers at home, the Biden administration may kill those same carmakers abroad.

That outcome would be bad for the climate, since it would slow the electrification of the US car fleet. It could also prove to be bad for taxpayers, said Ilaria Mazzocco, a senior fellow for Chinese business and economics at the Center for Strategic and International Studies: Because Washington will always bail out Detroit, the longer US automakers take to be competitive in the global EV market, the greater the risk that they will need saving later, once the world has shifted more definitively to EVs.

Washington’s current hawkishness toward China marks a departure from the last time US automakers faced a major threat from abroad. In the 1970s, when low-cost Japanese exports started to flood the US, the solution wasn’t tariffs, but an invitation to Japanese companies to open manufacturing shops in the US. American automakers haven’t been much interested in making low-cost cars since. In other words, rather than compete with Japan on its terms, Detroit pivoted to a new niche — a division of labor that still served US buyers.

But “that pathway is not open to Chinese automakers,” Mazzocco said. Many are hypothetically open to investing in the US, she said, but even if they didn’t face political opposition, the turbulent nature of US climate policy makes it an unattractive prospect. As it is, even collaboration or licensing agreements with Chinese companies — which, until the US battery industry becomes more mature, are the only possible path forward for lower-cost domestic EV manufacturing — are deeply frowned upon; this week a group of Republican lawmakers called for a total ban on imports by CATL and Gotion High-Tech, leading Chinese battery makers that have deals in place with Ford and Volkswagen.

The upshot is an operating environment that may prevent US automakers from being undercut now, but that may kneecap their ability to thrive in the auto market of the future — and leave US drivers with fewer, more expensive, lower-quality electric options.

The upcoming presidential election could change that dynamic. Donald Trump, no fan of EV tax breaks, suggested last month that he would be open to letting Chinese EV companies build factories in the US. The fate of competition or collaboration between US and Chinese automakers “isn’t written in stone yet,” Mazzocco said. “I think there are those in Washington who view this more positively, but it’s very difficult in an election year to come out publicly on that.”

Mansour’s company — which is backed by the Emirati clean-power giant Masdar, as well as the Africa Finance Corporation and the European Bank for Reconstruction and Development — currently has about 1.3 gigawatts of solar and onshore wind projects operating in Egypt, South Africa, and Senegal, but by far its biggest bet is on a wind farm in western Egypt that aims to ultimately generate 10GW of clean power.

For that project and others it is considering, Mansour said the price differential between Chinese and European manufacturers was vast — Vestas and Siemens quoted around $1.2 million per megawatt of power generated by a turbine, against about $650,000 to $700,000 from Goldwind and Envision. “And the kicker is that … you’re not buying an inferior product, you’re buying a superior product at a lower price.”

His experience is a testament to the remarkable, growth of China’s wind sector. Though northern Europe is perhaps the region best known for its use of offshore wind to generate clean power, China has been rapidly ramping up its share, overtaking the UK in 2021 as the world’s largest offshore wind market, and accounting for nearly half of all offshore wind installations in 2022. Thus far, the vast majority of China’s turbine production has been for domestic use — 88% of turbine capacity produced in China last year was for use in the country, according to the Global Wind Energy Council, against just 3% by Chinese producers headed overseas. Yet “there are clear signals that China intends to … further expand its market share in providing finished wind turbines to global markets,” GWEC noted.

All of this may in fact be moot: Fewer than half of Americans polled in a recent survey said they would even consider buying an EV, citing concerns such as range anxiety, the perceived lack of available charging infrastructure, and high prices. Most did not support EV purchase incentives, and the majority were not interested in buying Chinese-made EVs, “even if the cars are as much as $5,000 cheaper than domestic models,” researchers from the University of Chicago’s Energy Policy Institute said.

“You could envision a situation where the US market is kind of weird and insulated, but where [domestic automakers] could actually succeed by just focusing on the US,” Mazzocco said.

At least when it comes to EVs, Chinese manufacturers are training their sights on European buyers: The continent imposes a 10% tariff on vehicles imported from China, a pittance compared to the US rates. That has helped drive a surge in registrations of Chinese-made EVs on the continent as EU officials finalize an investigation into allegations Beijing illegally subsidizes its EV makers, potentially resulting in higher tariffs.