China's BYD "Build Your Dream" EV sales, image from Tweet below

Strong #EV sales from ⁦@BYDCompany⁩ in May in China. Passenger EV sales ~1M units to May, targeting total NEV sales (vast majority passenger) of 3.6M for 2023. That would be ~100% growth on 2022. Exports rising but mostly China sales. #lithium https://t.co/AVHVXMAcq5

— Rodney Hooper (@RodneyHooper13) June 1, 2023

China’s EV Juggernaut Is a Warning for the West

Wall Street Journal writer Greg Ip warns China’s EV Juggernaut Is a Warning for the West

China rocked the auto world twice this year. First, its electric vehicles stunned Western rivals at the Shanghai auto show with their quality, features and price. Then came reports that in the first quarter of 2023 it dethroned Japan as the world’s largest auto exporter.

When Western auto executives flew in for April’s Shanghai auto show, “they saw a sea of green plates, a sea of Chinese brands,” said Le, referring to the green license plates assigned to clean-energy vehicles in China. “They hear the sounds of the door closing, sit inside and look at the quality of the materials, the fabric or the plastic on the console, that’s the other holy s— moment—they’ve caught up to us.”

Manufacturers of gasoline cars are product-oriented, whereas EV manufacturers, like tech companies, are user-oriented, Le said. Chinese EVs feature at least two, often three, display screens, one suitable for watching movies from the back seat, multiple lidars (laser-based sensors) for driver assistance, and even a microphone for karaoke (quickly copied by Tesla). Meanwhile, Chinese suppliers such as CATL have gone from laggard to leader.

The threat to Western auto market share posed by Chinese EVs is one for which Western policy makers have no obvious answer. “You can shut off your own market and to a certain extent that will shield production for your domestic needs,” said Sebastian. “The question really is, what are you going to do for the global south, countries that are still very happily trading with China?” 

Meet the World's Largest Car Exporter

Eurointelligellence founder Wolfgang Münchau comments on IP's article with his synopsis in Meet the World's Largest Car Exporter

This is a watershed moment for industry. China has surpassed Japan and Germany to become the world's largest exporter of cars. But as Greg Ip writes in the Wall Street Journal, what really shocked China's western competitors is not the sales numbers, but the sheer quality of Chinese cars. 

Chinese EVs have entertainment systems inside the car, even microphones for karaoke, and several screens. It is the highest-end digital device, with wheels on it. The Europeans are absolutely hopeless at digital consumer products. They are up against something they don't understand. 

The very likely response, in Europe at least, will be to protect domestic car makers through tariffs. Ultimately, the prices will fall, and this is when the crunch for the European car industry will happen.

Tesla was the first car company to change its reliance on neodymium iron boron, a rare earth magnet, whose exports China is now starting to restrict. This is also why we think the industrial policy, promoted by Jake Sullivan, the US national security adviser, is confused. It commingles legitimate concerns over national security and supply chain security with pork-barrel industrial interests. We are heading back to the old adage of what's good for GM is good for America. Except that this is no longer true.

Construction Spending

Numerous people have commented on Twitter about a surge in US manufacturing construction. 

Manufacturing surveys say one thing, but the hard data says another.

Manufacturing construction spending is soaring. If they were really so bearish about the economy would they be doing this?

I don't think so. Another real positive on the economy that isn't being discussed. pic.twitter.com/caURdo1WMD

— Ryan Detrick, CMT (@RyanDetrick) June 2, 2023

Chips, IRA

“.. The numbers are stunning. Here’s an annotated chart of manufacturing construction spending.”@paulkrugman @nytopinion #USIndustrialPolicy https://t.co/lVefNunZGF pic.twitter.com/cIPVYyr5tk

— Carl Quintanilla (@carlquintanilla) June 7, 2023

Everything Fine? 

Yes, manufacturing construction spending is rising rapidly.

But no, manufacturing construction spending is not a good recession indicator. pic.twitter.com/FkNUNYG0Y4

— Eric Basmajian (@EPBResearch) June 6, 2023

A Bit of Perspective

What's Going On?

Subsidies are driving up industrial construction. None of these subsidies will lower inflation.

Indeed, the hasty and unwarranted push for EVs, all of which needs to happen in the USD is guaranteed to increase inflation.

If the Chinese government says "your next car will be an EV", then your next car will be an EV. It's not so simple in the US where neither the infrastructure nor the materials are in place.

China has a monopoly or near monopoly on needed rare earth elements. In the US, there are pushbacks from Greens on mines and pushbacks from Republicans on the clean energy idea itself. 

China generates 56% of its is electricity need from coal and is still building more coal-fire plants. What's the US going to do? 

Destroying the Desert Releases Stored Carbon

Please note that Biden's Solar Push Is Destroying the Desert and Releasing Stored Carbon

Meanwhile, any benefit from the massive push to EVs is totally undermined by Wildfires in Canada and the US.

If carbon dioxide suppression is the goal, better forest management would do much more than anything gained from EVs.

Subsidies may be good for GM, but subsidies without supply chain improvements, infrastructure, fast chargers, and genuine consumer demand will do little but create bottlenecks, frustration, and more inflation.

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