The Chinese Automotive Threat is not New for U.S. Automakers
A recent InsideEVs article suggested a “Cold War” is brewing between China and the West involving Chinese automakers and western automotive companies. In the U.S., the Biden administration announced a significant increase in tariffs on Chinese clean energy imports, particularly Chinese electric vehicles (EVs). President Biden recently stated: “For years, the Chinese government has poured state money into Chinese companies ... it’s not competition, it’s cheating.” While Elon Musk has frequently praised Chinese automakers for their competitiveness and innovation, Musk said recently that Chinese EVs would likely "demolish" most competitors if there weren't trade barriers in place.
The Rise of Japanese Automakers: A Historical Perspective
This is not the first time the U.S. automotive industry has faced the threat of import automotive competition into its home market. Beginning in the 1970s, domestic automakers faced a new and seemingly formidable competitor: Japanese auto companies. Cars from Toyota, Nissan and Honda were often more fuel-efficient, reliable, and affordable than their American counterparts.
There’s a kind of war going on, and it’s a war being fought just as surely as if we were using bullets. The Japanese are winning this war because they are fighting it on their terms. - United Auto Workers President Douglas Fraser, 1980
Like today, politicians, labor unions and American automotive company executives believed Japan posed a direct threat to U.S. manufacturers and jobs. President Ronald Reagan, a proponent of free-market policies, was compelled to address the economic and political pressures from the large U.S. trade deficit with Japan, negotiating a voluntary export restraint to limit the number of cars Japanese automakers could send to the U.S.
In a strategic move that upended competitive dynamics, Japanese automakers began establishing manufacturing plants in the U.S. This strategy not only helped circumvent trade barriers but also created thousands of American jobs, contributing to local economies and softening the stance of some critics.
The feared devastation of the U.S. automotive industry did not materialize as predicted. The presence of Japanese automakers spurred innovation and competition. Since the 2008 financial crisis, U.S. auto companies have thrived and continue to adapt to changes in technology and consumer preferences.
Predicting the outcome of current tensions with China and its automakers is challenging. However, it is crucial to recognize the U.S. auto industry’s history of resilience and its capacity for long-term adaptation.
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