High-tech manufacturing in China over the past year has often felt like watching a looking-glass parody of the US.
In America, electric vehicles have been in retreat all year. General Motors Co. and Ford Motor Co. have scaled back expansion plans and cut jobs amid flagging demand for battery cars. Analyst expectations for Tesla Inc.’s fiscal 2024 net income are barely a third of what they were two years ago. Even Apple Inc. junked its 10-year, multi-billion secretive project to build a revolutionary EV.
On the other side of the Pacific, things couldn’t be more different. Battery and plug-in cars, which made up just 5% or so of the market in 2020, comprised 49.8% of all car sales in October, and only one out of the top 10 sellers came without a plug. Even the threat of tariffs from trade partners has barely slowed manufacturers’ global ambitions. What’s more, phone companies have, almost overnight, become major players.
Xiaomi Corp. made a name for itself selling $100 smartphones that do a decent imitation of far costlier Apple and Samsung Electronics Co. products. In March, just a month after Apple told employees that its Project Titan car initiative was being shut down, Chief Executive Officer Lei Jun announced his bid to do the same thing for sports cars.
At a base price of 215,900 yuan ($30,000) for Chinese buyers, the SU7 EV accelerates faster than a Porsche Taycan but costs about what you’d pay for a Toyota Camry in the US. Booming sales of the vehicle helped the company smash through estimates of September quarter revenue last week. Shares have almost doubled since the SU7 was unveiled.
Xiaomi isn’t the only Chinese phone-maker getting on the road. A few years ago, hardly anyone had heard of Chongqing Sokon Automobile Group, a supplier of springs and shock absorbers that Huawei Technologies Co. was looking to tie up with. Now renamed Seres Group Co. and producing EVs with Huawei under the AITO brand, it’s one of China’s five biggest automakers by market cap and worth more than Nissan Motor Co., Subaru Corp., and Mazda Motor Corp. put together.
One of the most striking things about these collaborations is the extent to which China’s EV industry has rejected the tightly controlled approach to car manufacturing adopted by Apple. The US company at one point looked at buying Tesla and McLaren Automotive Ltd. and gave up on the idea of a partnership with Mercedes-Benz Group AG for the same reason, Bloomberg BusinessWeek reported earlier this year: a conviction that they’d be better off producing vehicles in-house.
The business of car-making in China is far more promiscuous. Huawei has Seres-style alliances with three other major local manufacturers and presents itself as a provider of smart software, hardware and retail expertise that more traditional automakers can put on four wheels. It’s also joined forces with Anhui Jianghuai Auto Group Corp., or JAC, which manufactures cars for US-listed EV-maker Nio Inc., on a soon-to-be-released luxury people mover. Xiaomi is now making its SU7 in-house, but even there it initially tied up with BAIC Motor Corp. in developing it.
The most ironic aspect of this frantic partner-swapping is that it resembles nothing so much as the model pioneered by Apple itself. As the company’s supply-chain guru since 1998, Chief Executive Officer Tim Cook moved it away from dependence on the factories in Colorado and California that made the first iMac desktop computers, and toward a sprawling network of suppliers on multiple continents.
The key insight was that assembling products was unprofitable grunt work, but designing them could be fantastically lucrative, so it’s better to outsource manufacturing to a Seres, JAC, or Hon Hai Precision Industry Co. and stick to what you do best. That policy was a world-changing success — but it’s the Chinese car industry, rather than Apple itself, that appears to have taken the lesson to heart.
That makes the failure of Apple’s car project a microcosm of the failure of US industrial strategy over the past decade and a half.
Consider the vast edifice of protectionism built up since President-elect Donald Trump’s first term: $79 billion in tariffs adding $625 in tax expenses to every American household; the dwindling of Apple’s overseas asset base, from 64% of the total in 2012 to about 22% this year; the US government straining to thwart China’s attempt to become a high-tech powerhouse, and bring manufacturing jobs back home. Consider, too, the further tariff hikes now promised by Trump: A further half-trillion in taxes that might strip nearly 700,000 US jobs — far more than the 507,000 manufacturing jobs created since January 2017.
What has all that achieved? Right now, China has an EV industry that the world envies and fears in equal measure. Apple’s attempt to build a car in-house, meanwhile, never made it off the starting blocks. Was it really worth it?
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