But what happens to the failures, especially since they are overwhelmingly subsidized by local governments?
Shanghai (SAIC), Jiangxi (BAIC), Guangxi (GAG), Guangdong (GAC), Hebei (Dongfeng), Beijing (BAIC), and other prefectures are putting tens of millions of dollars in SoEs that cannot compete with BYD domestically, and face preemptive hurdles entering foreign markets.
If these were private players, it wouldn't matter as much because they could be safely shut down, but these are mixed public-private, and this means a lot of misallocated capital due to political considerations.
Ideally, all these prefectures could better utilize that equivalent amount of money building domestic consumption instead - like I pointed to you before, the median household income in China is still around $350-400/mo in 2024, so even with a loan, a cheap class-A vehicle like a Wuling Hongguang Mini is still pricy.
Instead, these players are forced to export abroad leading to unnecessary trade wars and causing other countries to either limit ToTs with Chinese companies, or force Chinese companies to ToT to domestic players abroad.
This is the same story in PV Cells, Analog Chips, Mobile Phones, etc.
>Instead, these players are forced to export abroad leading to unnecessary trade wars
This is very necessary, no reason not to take share from incumbent car makers, especially in RoW markets. ToT domestic players fine (E: as in fine to jurisdictions that, especially ASEAN / more integration), especially with current sanctions/potential, PRC FDI via recirculating USDs, better use now than risk lose later. E2: Let's not pretend PRC trade wars are any less strategic than US trade wars (like semi). PRC EVs sells -> EV piles -> energy infra -> sensors/fusion -> telco.
No worries. We all have lives.
> Some local jurisdictions
It's not some - it's a lot. And a number of these are not wealthy prefectures - Guangxi, Jiangxi, Jillin, Anhui, and Hebei underperform compared to the Chinese average on social indicators and economic health.
The amount of money spent to subsidize EV cars made by GAG, FAW, Dongfeng, Changan, Chery, JAC, etc that most Chinese buyers just don't think about for EVs when they can buy a BYD is staggering, and could be better used by the prefectures I listed to better living standards or further increase consumer spending via DBTs or a better welfare system (which itself has been devolved to prefectures since the 90s).
> This [export] is very necessary
Absolutely, and this is why every major automotive market (US, EU, TR, MX, BR, SK, JP, VN, ID, IN, ZA) has already or is in the process of closing their markets to direct "Made in China" automotive exports (as well as other sectors like renewables, consumer electronics, pharmaceuticals, etc). Why should these countries lose their domestic champions at the expense of Chinese players?
What large greenfield market can Chinese manufacturers directly sell to? And you can't say "Africa" - it's not a uniform market, and Chinese companies face competition from (depending on the region) Turkish, Japanese, Korean, Brazilian, Vietnamese, Indian, Emirati, European, South African, and American competitors.
This is the crux of the problem - the very low median household income forcing players to export.
Either the collective billions in subsidizes are deployed to push Chinese median household incomes to at least Malaysian or Mexican levels (~$10,000/yr) or even Thai levels (~$6,500/yr) in order to consume this excess capacity, or keep burning money subsidizing laggards while alienating foreign markets and partners.
> Let's not pretend PRC trade wars are any less strategic than US trade wars
At a high level it is, but the governance is atrocious. Just look at the First and Second Big Fund for example.
And anyhow, Chinese manufacturers in these sectors then face similar tariffs like EVs in the markets I listed above under NatSec or Dumping grounds, which in turn drives neighbors further into the US camp (eg. VN after the 2011 standoff and the Techo Canal, JP after Senkaku Diaoyu, TW after the 2014 trade war, SK after the 2017 trade war, India after the 2019-20 Galwan crisis, PH after the PoGo scandal, ID and the US CSP, etc).
This in turn means you guys will escalate under the fear of being encircled, which pushes those countries to further up the ante. The same fear Chinese nationalists have about the US is the fear those countries have about China.
Either way, this means China both loses potential economic partners/markets AND exacerbates an arms race.
It didn't have to be this way, but the MFA's and CMC's tone change since 2014 has drastically deteriorated China's relations with it's neighbors.