How Western Auto Industry Goes Down The Drain: China's EV Makers Set Sights on Latin America

"CAMACARI, Brazil -- When Ford Motor shut its factory here in 2021 after more than a century in the country, Uelcson Alves and the automaker's thousands of other workers in this once-thriving Brazilian town panicked.

"It was devastating. Stores started closing and then health clinics and schools," said Alves. It was the middle of the pandemic, and his family, like many others, suddenly had no health insurance, he said. The town's streets became empty as many families simply left in search of work elsewhere.

But things are looking up these days in Camacari: The Chinese are here.

BYD, one of the world's biggest electric-vehicle producers, bought the abandoned plant last year and is rapidly transforming the 1,100-acre plot on Henry Ford Avenue into its Latin American hub.

Largely shut out of the U.S. and facing punitive tariffs in Europe, Chinese makers of electric and hybrid vehicles have flooded Latin America and other regions with cheap cars after ramping up production at home -- a strategy that threatens some of the world's largest automakers at a time of deepening trade tensions.

Latin America and the Caribbean -- home to about 650 million people and much of the lithium that EV makers need for batteries -- are among the markets at the top of the list. BYD said it is thinking about building a plant in Mexico, where some 10% of new-car sales are Chinese brands, while also rapidly expanding its fleet of electric buses from Colombia to Chile. Other Chinese companies, such as Great Wall Motor, also are moving to Brazil, taking over a Mercedes-Benz plant that was abandoned after the German company ceased car production in the country.

"It's a big paradigm shift," Ricardo Bastos, Great Wall's institutional-relations director in Brazil, said in an interview. "These were two factories that produced combustion vehicles, they shut down operations and everyone was fired, and now they will be reopened to produce new technologies."

Home to more than 200 million people, Brazil is already BYD's biggest auto market outside China, Alexandre Baldy, BYD's senior vice president in Brazil, said in an interview.

Brazil put some 51,000 BYD cars on the road between January and September this year, accounting for about 72% of all imported cars given license plates during that period, according to the Brazilian Association of Automobile Importers and Manufacturers. That is more than eight times the number of BYD cars registered for use in the same period last year. The figures don't include popular brands such as Fiat, which is owned by Stellantis and produced in Brazil, and which saw some 370,000 of its vehicles registered during the same period.

"Brazil has positively surprised us," said Baldy. Costing close to $1 billion, the Camacari plant will begin operating in December, initially churning out 150,000 cars next year and by 2028 producing 300,000.

Some local economists question the reliance on Beijing. Since overtaking the U.S. as Brazil's biggest trading partner in 2009, China has flooded the local market with cheap imports, contributing to a process of stark deindustrialization. Manufacturing has shrunk from 36% of Brazil's gross domestic product in 1985 to just 11% last year.

Government officials are hopeful that Brazil will reap the benefits this time, though part of the workforce building the plant is Chinese. Davidson Magalhaes, the government secretary in charge of employment in the northeastern state of Bahia, where Camacari is located, said he hopes the BYD factory will generate some 15,000 formal and informal jobs in the region. That is far more than the 9,000 lost with Ford's exit.

Great Wall Motor, the Chinese manufacturer of electric sport-utility vehicles and pickup trucks, said it plans to invest $1.8 billion by 2032, converting a small former Mercedes-Benz plant in Iracemapolis in Sao Paulo state into its own South American hub.

The West's legacy carmakers have struggled to keep up with Chinese production of conventional combustion-engine cars as well as EVs in some of the world's top growth markets.

Ford Chief Executive Jim Farley told The Wall Street Journal in an interview that China's carmakers represent an "existential threat" to the company. And earlier this year, he identified South America, as well as Africa, as make-or-break markets for Ford.

The Biden administration has imposed a 100% tariff on Chinese EVs, while the European Union last week imposed tariffs as high as 45% on EVs from China. Former President Donald Trump, should he be re-elected, has pledged high tariffs on Chinese vehicles.

Brazilian President Luiz Inacio Lula da Silva has introduced his own measures to protect local industry -- by prodding Chinese makers to invest and offering automakers such as BYD incentives to build plants in the country.

"The hope is that BYD intensifies its investments to produce electric cars in Brazil, generating jobs and income in the country," Brazil's Ministry of Industry said.

Under rules set by Mercosur, the South American trade bloc, automakers that produce at least 40% of their cars on Brazilian soil can export to the rest of South America without import taxes in those countries. It was a major factor behind Great Wall's decision to produce its SUV, Haval, in Sao Paulo, Bastos said.

BYD has battled to offset the effects of protectionist measures in the U.S. and Europe by expanding aggressively wherever and whenever it can. It already has plants in Thailand and Uzbekistan, and announced plans for factories in Turkey and Hungary.

In Camacari, some locals said they remain skeptical over how much the factory will benefit the region. BYD brought in a Chinese company, Jinjiang Construction Group, to help build the plant, flooding the region with Chinese workers who mix little with the locals.

BYD said it is common practice for a company to work with a construction company that it already knows for a factory that big, adding that most of the plant's workers will be Brazilian." [1]

Western high tariffs  on Chinese cars hurt Western car industry's ability to reduce prices and increase quality, since there is no need to compete. Nobody in the world wants to buy Western cars. This is a death sentence for Western car industry and the ability to protect Western countries in big wars when the industrial capacity is decisive, as World War II demonstrated.

 

1. China's EV Makers Set Sights on Latin America. Pearson, Samantha.  Wall Street Journal, Eastern edition; New York, N.Y.. 04 Nov 2024: B.1.

 

Neither the Conservatives nor the Social Democrats have yet led Lithuania out of serfdom. Our elite got used to stealing [1], so they can't work anymore

 

 "Akio Morita, the founder of Sony, had a clear mission after World War II - to make Japan famous as a country of quality production. Not Sony, but Japan. It seems strange, but at that time Japan was a country of cheap production, and this mission not only motivated its employees - it changed the image of the whole country.

 

 Lithuania still too often competes with lower price instead of higher quality. Do we have the courage, talent, capital and... good management to repeat the success of other countries in competing with high quality?

 

 It is management that I want to emphasize, because I see too much serf-like thinking and too much tsarist-serf management in Lithuania.

 

 The Evolution of Management: From Serfdom to Meaning and Benefit

 

 Serfdom is the principle of using the sticks

 

 The most primitive form of management is punishment. That's why Lithuanians are only punished.

 

 This ineffective form of management has been known for millennia. Although abolished in theory, it still applies in practice in Lithuania.

 

 Mr. Leader punishes, and the people then act like serfs, i.e. attempt not to achieve the result, but to avoid the stick:

 

 Avoids indicators;

 Shifts responsibility to others;

 He does only as much as he is told and no more.

 

 You can't expect investment, innovation or progress here. A punished person shrinks and closes. Does not suggest or think about how to do better.

 

 Meanwhile, in Lithuania, only 18% of employees answer that their teams have a normal attitude towards mistakes, i.e. in Lithuania, we still punish mistakes. We look for the guilty and how to punish them, not how to learn and do better.

 

 The numbers are even worse in the public sector and among older workers.

 

 This is related to the fact that we were the last in Europe to abolish serfdom, and the Soviet era brought it back - took away private property, forced us into collective farms and punished those who wanted to trade or earn more.

 

 Although we have been independent for 30 years, we still have too many master-slave relationships.

 

 Where the master thinks and the serf just does what he is told.

 

 The worst thing is when people get used to thinking: "My boss makes me think - what does he get paid for?!" - a real quote from an outraged employee.

 

 We need more free, independent and responsible people for themselves and their environment, who do not need to be made to think, who think for themselves.

 

 It requires less servitude and more benefits at work.

 

 Capitalism is the principle of profit

 

 F.W. Taylor, an American engineer famous for his management methods that increased industrial efficiency, as early as 1911. The US formulated the need to measure and reward those who do more and/or better.

 

 After more than 100 years, only about 30% of public sector workers in Lithuania agree that they will get more if they do a good job. Most do not see the financial benefit of trying harder.

 

 Certainly not everyone sees a direct connection between the result and benefits in business. How common is it with us to share the company's profits?

 

 And when there is no incentive to do more, there is an incentive to do less.

 

 Therefore, both business and the public sector need less punishment, but more goals and indicators. Measure and motivate those who do more, rather than punish those who fall short.

 

 After all, only those who don't make mistakes - NBA star Kobe Bryant is the most overlooked basketball player!

 

 Do you think we would have heard about him if the coaches had penalized him for missed shots instead of encouraging him to make them?

 

 The profit system is tested and works great, although it has a couple of drawbacks:

 

 Employees stop doing what matters when they are not measured and rewarded;

 

 Encourages short-term targets (quarterly/yearly) rather than long-term success.

 

 The aforementioned problems can be avoided if, in addition to goals and indicators, the organization has a mission even greater than itself.

 

 Mission is the principle of meaning

 

 Today, the most competitive business is increasingly talking about a mission that is bigger than the company's profit:

 

 Tesla doesn't just make cars, it's their mission to fight climate change;

 SpaceX doesn't just send satellites into space, their mission is to send people to Mars.

 

 And this is not surprising, because research by psychologists reveals that employee happiness and productivity are directly related to three essential elements:

 

 Meaning at work;

 Opportunity to improve;

 Independence.

 

 Companies that create these conditions achieve exceptional results. They not only attract the best specialists, but also help them to reveal themselves, because such employees:

 

 Actively looks for ways to help colleagues and customers

 Constantly improving his skills

 Solves problems independently

 Creates innovations

 

 A mission greater than a company's profits inspires not only employees, but also investors and regulators to contribute to the success of its operations.

 

 Such organizations inspire and achieve the impossible.

 

 It's time for Lithuania to move from competition, based on smaller price, to higher quality than the competition.

 

 Moving from punishment to benefit and meaning."

 

1. If prices in Lithuania are similar to those in the West, and salaries are twice as low, it means that Lithuanian "businessmen" steal half of our salary every month:

 

 "People ask all the time how Lithuanians can live here. We say that Lithuanians save and become poor," said Jakob Wöllenstein, a German living in Lithuania. This year, the average monthly salary in Germany ranges from 2,500 to 2,800 euros "in hand". At the same time, the average wage in Lithuania, after taxes, is about half as much - about 1,300 euros. "It is strange that there is such a difference in the salary level, how much people earn in Germany and Lithuania, but still the prices are very similar. If you go to a store, it often happens that certain things, goods are even more expensive in Lithuania than in Germany," said J. Wöllenstein."