China & US Auto Market — Chinese Auto Disrupting Everyone Else

The big news is that "New Energy Vehicle" sales in July exceeded 50% of sales for the first time ever! How did that happen? BYD and Tesla have been selling great electric cars in China for some time, and those sales continue to grow, but the bigger change is that BYD, Geely, and Li Auto have come out with low priced plug-in hybrids that are the same price as gas cars but have far more advanced technology and cost a lot less to fuel and maintain. Domestic Chinese automakers are doing comparatively well in a brutally competitive market. They are quickly expanding their sales of both BEVs and PHEVs to domestic customers, while they are also quickly expanding their exports of both their world leading electrified offerings and their gas models that are uncompetitive in the Chinese domestic market. The way the auto industry works is that if your sales drop dramatically, the fixed costs of an auto factory are so high, you will take big losses. With massive overcapacity in the Chinese market, especially at the joint ventures, they will try to use this capacity to produce cars for export to other markets. The companies will suffer as they lose a lot of sales outside the US market, but they are doing well inside the US. I expect as EVs get more popular, they may have difficulty transitioning quickly enough. Then there would be another transition from PHEV to EV, but I expect that to be quite fast, as everyone that I know who buys a PHEV is ready for an EV when they buy their next car.