Bloomberg Audio Studios, podcasts, radio news. I'm Stephen Carol and this is Here's Why, where we take one news story and explain it in just a few minutes with our experts here at Bloomberg. It's the biggest transformation of the auto industry in a century. The electric cars are having a moment. The demand for electric vehicles is booming worldwide. Sales of electric vehicles are projected to boom over the next few years. The heavy boom is here to stay.
The massive growth in electric vehicles has come thanks to generous subsidies from governments in many parts of the world, and with it cries of unfair competition, particularly directed at China, whose subsidies range from cheap land to buying incentives. That's caused trade and diplomatic tensions with the United States and the European Union.
Biden came out with his terrors from the Chinese cars going over to the US, But now the EU is sort of prepping their ters.
Canada is now preparing potential new tarrisl on Chinese electric vehicles.
This new range of tariffs all increases no decreases on a range of industries, including EV's.
But at the same time, demand for electric vehicles may be leveling off, and the question of affordability makes subsidies all the more important. So here's why governments are desperate to defend their EV industries, and our Global Autos editor Craig Trudall joins us now for more. Hey, Greg, great to see you. How much are governments putting into supporting EV production?
Yeah, the numbers, if you look globally, are staggering. But just to pick out one number in particular, and this comes recently from the Center for Strategic and International Studies, they estimated last month that China's EV sector received at least two hundred and thirty one billion dollars in government subsidies and aid from two thousand and nine through the end of last year, and that was about eighteen point eight percent of total sales in that span. So we're
talking about a serious amount of money. And the other thing I think that really stuck out for me from
that report was just how sustained that is? Right, We're talking about from two thousand and nine to last year, so quite a bit of time that has passed, and that helps you understand that when you read these figures, whether it's the Biden administration and all the money they're pumping into this through the IRA, whether you look at the European Union and individual countries how much they're pumping in.
The reason they're doing so is because they are on the back foot as a result of the significant amount of money and sustained support that China has put into this sector.
So is this about protectionism them we think about the sums of money involved or is it a push towards the green translation that's motivating governments to put this amount of money involved.
I think it's both, and when you look back over many years, this is an industry that governments have been willing to protect right and for good reason. I mean, the auto industry accounts for about seven percent of total employment in the EU. Some two point four million Europeans are directly involved in manufacturing of cars and vans and trucks. The industry is something like three to three point five
percent of USGDP. So you know, if you are assuming that in order for this industry to continue, it needs to go greener and it needs to electrify and this is the way forward, then you absolutely need to protect companies that are trying to make that long and costly transition. China didn't become so big overnight. It took quite a bit of money and a long period of sort of patients. And I do think that we're going to see some real sort of questions being raised as to are we
throwing good money after bad. On the other side of that, you have to say, this is an industry with so many jobs to protect that if the state doesn't step in, then a lot of people are going to be out of work.
What about the free market argument? Though, wouldn't it be just easier if we let the cheaper cars subsidized by China come into the market, bring down costs, more people will spend, stimulate the markets.
I think there are totally valid arguments for at least being more open than we've seen some government and so you've seen the Biden administration recently announced that they're going to take tariffs on Chinese evs north of one hundred percent.
That's really, really substantial. And I do think it's a case where when we talk about election politics, even in spite of that when he levels attacks against this former president Donald Trump still uses this rhetoric of this idea that Biden wants to have all of Americans driving evs and oh, by the way, they're all going to come from China, even in spite of the fact that the administration is taking such a dramatic measures to prevent that
very future that Trump has warned about. So I do think that politics really comes into play here as well in terms of protectionism, and it plays well, and Trump, I think is quite honest about that being something that he's proud of that this was an observation that he has made that was right and has proven right in the sense that it plays well with voters.
Yeah, because electric vehicles have been caught up in these geopolitical tensions between the US and China, as you mentioned, but the measures being used the taris, for example, those tireffs on imports of Chinese electric cars not terribly effective given that there aren't that many Chinese electric cars sold in the US.
I think the terriff rate under the Trump administration went up significantly and already was prohibitive. And I do think that while there has been some flirtation among some companies, some of the manufacturers in China that do obviously see the US for what it is, which is quite a big market, and a market that not only is big, but is where more than anywhere else in the world, people are willing to pay significant amounts of money for
each vehicle that is purchased. It is a really attractive market. And yet even still companies like buyd this is a company that's been lighting the world on fire lately, even they have really had trepidation before these recent measures that the Biden administration have announced about entering that market. They just don't feel like they are welcome, and I think for good reason, given where the winds are blowing.
How did drivers feel about all of this? Where is demand for electric vehicles and is it on pace to replace in a big way the traditional combustion engine.
I think we really got very excited over the last few years about the momentum that was seen in electric vehicles, and for the most part, even with this sort of slowdown that we've seen in the last year or so, it is the case that when people buy evs, they generally are quite happy with them. And you do talk with people who know this industry well and even just
make the transition without necessarily being car buffs. They will tell you the faster acceleration if you don't have to worry about stopping for gas all the time or paying for gas that's a quite nice perk.
How far away is the infrastructure from being able to provide us.
That's the rub right, and also just concerns about even if the infrastructure is there, how often am I going to need it? And I do think that this is the ultimate sort of case of consumers not necessarily making purchases rationally. It very much comes from a sort of psychological aspect of do I need charging even if I'm only going to need it just a handful of times of year tops. This is generally the case that most trips are quite short, electric vehicles from more than capable of handling them.
Yeah, and of course an interesting factor to consider the future of this industry as well. Craig Trudell, our Global Autos Editor, thank you very much for joining us with that explanation of the centrality of the EV industry to those trade tensions as well. Thanks to Craig Trudell, our Global Autos Editor. For more explanations like this from our team of twenty seven hundred journalists and analysts around the world. Search for Quick Take on the Bloomberg website or Bloomberg
Business app. I'm Stephen Carol. This is Here's why. I'll be back next week with more. Thanks for listening.