The $18B Electric-Car Bubble at Risk of Bursting in China | Hacker News Reader

The $18B Electric-Car Bubble at Risk of Bursting in China

bloomberg.com

83 pointskristianp50 comments

A newer and better article on EVs in China: https://fortune.com/longform/electric-car-auto-industry-chin...

An interesting tidbit from this article: "One direct result of the meltdown was the Obama administration’s 2009 economic-stimulus plan, which included billions of dollars in support for U.S. clean-energy industries. That spending plan caught the attention of Beijing. And it led, in 2009, to what Ouyang describes as a “strategic discussion at high levels” in the Chinese government about how the country should proceed with its own clean-technology push. China’s State Council, the country’s top policymaking body, ultimately announced nine “strategic” industries, one of which was electric cars."

In China this is common when everyone wants to do or appear to do Govt promoted ideas and schemes to get govt subsidy. [1]

If they do not act in time someone else will get it.

It works somewhat similar to startup world where one raise money with compelling story, just in this case instead of VC it's govt money. Some survive and become big, but most fail. Obviously some are outright fraud.

[1] https://www.scmp.com/news/china/economy/article/1976825/chin...

Gov is more likely to be schemed than VC because those who make investment decision don’t get as much reward/punishment. However, for the same reason, gov can also invest in projects with long term benefits. So gov is not intrinsically good or bad; it’s really about good governance.

I don’t know if that’s true. Overselling becomes less enticing to these administrators. It’s really a question if less motivated but more rational people are better at these decisions.

That said, there is plenty of incompetence, fraud, and corruption to make the worst on both sides really bad.

There's tons of performance bike manufacturers with minimal variation. Reason is its easy - not that many parts, parts easily configured and modular, easy to build, low maintenance.

Maybe EVs are similar. lower complexity than fossil engines (fewer parts and complexity moves down the supply chain). Perhaps such a large number of vehicle producers is sustainable. The real ev companies are the companies making batteries, motors, and ev base tech.

That would be similar to the dozens of Android phone brands. But new industries sometimes start that way, but eventually shake out into an oligopoly.

But new industries sometimes start that way, but eventually shake out into an oligopoly. The Herfindahl–Hirschman Index might say that's enough functional competition to sustain a good outcome. It depends. It's why we have in ICE engines anyway these days.

I think cars are a bit different. Mobile phones all look the same and function largely the same and are used in similar use cases. The environments cars are used in, patterns of usage and level of customisation people care about are incredibly diverse. Apple has a massive market share with just a few phone models with limited options on each, but all the major car makers have many, many models each with endless customisations. The market supports enormous diversity.

EVs are not that much less complex: interior is the same (hundreds of parts), suspension, AC, heat, wiper blades, brakes, etc. The engine is certainly different but I don't think that lowers the overall complexity of the vehicle into "anyone can do it" territory.

It lowers the complexity sufficiently that traditional car makers in Germany are huffing and puffing about tens of thousands of jobs that won't be needed anymore.

Maybe they want subsidies. The German econony is slowing and this is another reason: people delay the purchase of an ICE vehicle indefinitely (they're going to be banned by 2030s in almost every country), diesel sales are at all time lows (emissions compliance) and the auto industry is stuck with the inventory.

AFAIK know, ICE vehicle sales will be banned around that time.

You're right. Still, it doesn't make you want to buy one now, does it? Because it's just a matter of tine until they'll be heavily taxed.

That is funny. I remember reading about just in time production in german magazines since decades. Maybe they shouldn't have produced so much in advance?

IOW: SELBST SCHULD!

All those parts can be bought essentially off the shelf. It’s obviously not anyone can do it, but certainly the barrier to entry has been significantly lowered.

Combustion engines can be bought essentially off-the-shelf too.

Which parts do I choose? How do I assemble them? How do I make sure they all fit together? Plus as another commenter pointed out, I can buy an off-the-shelf combustion engine. So by your logic, it should be just as easy to build an ICE car. Yet neither is easy to design/build.

I also see a shift in how cars are seen. Before they were a high grade cultural item. A blend of technology, lifestyle, time saver... Now it's starting to look more and more as a commodity, and even a problematic one in case of ICE due to CO2.

An ICE wiring harness costs more than the transmission, and I’ve only heard Tesla getting patents on significant innovations around the wiring harness component. All the other EVs, (including current Teslas) use old wiring harness tech, which has evolved into quite a plate-of-spaghetti of a standard.

I’m really looking forward to see what Tesla comes up with on the Y.

>An ICE wiring harness costs more than the transmission

Where did you get that peculiar idea? :o Wire harness _replacement_ might be more expensive than transmission swap, but thats due to labor involved in pulling engine out. Average OEM SUV harness set (all, engine/entertainment etc) will cost you <$1000 from the dealer. Engine harness alone is around $200-400 for big V8 ones.

OEM transmission? you are looking at $4K.

Ah that's interesting - Elon Musk was talking about the importance of cost and complexity reduction in the wiring harness, and I think in reporting that it was mentioned that the harness costs more than a transmission. Probably another example of the Gell-Mann Amnesia effect. :P

Note many of these are just forced by policies to "make" EV if they want to continue making traditional vehicles, others are just making money off of policies and subsidies, buyers are mostly forced to buy it due to license plate quotas.

EVs' reputation in China is going downhill ever faster, it's been called "electric daddy".

Urban area is extremely dense so it's lucky to find a place to charge where it hasn't been ocupied, many place refuse to turn on their chargers.

Hope western media can stop praising China's EV industry mindlessly, it's there coz of artificial markets. Just like farmers are banned to use coal, but they are never gonna be able to afford the natural gas heaters required to install.

>> many place refuse to turn on their chargers.

They just needs the right incentives to be plugged in like being rewarded for being able to provide frequency response while plugged in. The following link supports my argument https://link.springer.com/article/10.1007/s40565-015-0124-0

> Urban area is extremely dense so it's lucky to find a place to charge where it hasn't been ocupied, many place refuse to turn on chargers.

Plugging a car to the power grid is just one of many solutions to the problem of powering a car. There are other ways to solve the same problem, which in totalitarian regimes with a centrally planned economy are easier to implement, such as swapping pre-charged batteries.

Not only are you overlooking the massive size and weight of these batteries which would make it infeasible to build a battery swapping station in a smaller footprint than the space required for charging stalls but you have not addressed what to do about the cooling of the batteries. The Model 3 has coolant lines going through the battery itself so each battery swap would also require dumping and refilling fluid.

Nonsense.

"Electric-Car Bubble"...

"EV sales make up just 4 percent of overall passenger vehicle sales of 23.7 million units, according to the China Association of Automobile Manufacturers."

Yup, definitely sounds like a bubble.

Smog is their main problem, and EVs are the solution. Exponential growth will continue. And I'm tired of these anti-EV/anti-Tesla articles from Bloomberg.

It's an investment bubble, not a market share bubble. Bloomberg is making the simple point that there are an awful lot of EV companies currently and that there are a lot of investments locked up in these companies. The consequence of this market consolidating to a few successful players means that a lot of these investments will be wiped out.

However, I disagree that this is a huge problem though because I assume the likely survivors of this would be comparatively well funded meaning that the size of the investments that will be wiped out is much less than the full 18B. Also, 18B is not actually a lot in a market that is probably going to be worth hundreds of billions. Arguably it's not actually enough for China to dominate here. E.g. VW is easily matching this with their own 50B worth of investments that they announced in the last years.Finally, companies with decent in house technology or some other edge are not worthless and might end up being acquired; meaning investors get some kind of return on investment. It's the weaker players without interesting technology or enough funding that are going to be wiped out first. If you invested in those, yes you will lose your money.

I'd be more worried about the ICE bubble of manufacturers that are failing to adapt to EVs. E.g. BMW seems to have a problem here and Toyota has been dragging its heels rolling out decent EVs as well and instead continue to invest in dead ends (in my view) like hydrogen or hybrid. There's a lot of captial locked up in companies like that as well as their suppliers. That's a much bigger bubble and I think countries like Germany where I currently live are going to have a very rough decade where lot of traditional companies are either going to scale down or disappear entirely. EVs seems to have been growing more rapidly than some of these companies hoped and this is already hurting them. In Germany there are thousands of companies employing hundreds of thousands of people that are going to be affected by that.

I've heard of market saturation, but market share bubble?

Bloomberg is not making a simple point. The article is titled as if there is, without a doubt, a bubble. When a bubble pops, everyone loses money and only the strongest companies survive. Many new entrants into a rapidly growing market, some of which get shaken out or acquired as the market grows and consolidates, does not constitute a bubble.

Your second paragraph is an argument against this being "an investment bubble".

I agree 100% with the last paragraph.

> Smog is their main problem, and EVs are the solution.

They are not the solution. They represent a specific way to mitigate the problem by reducing the output of a very specific type of emissions.

I'd argue that setting up a functioning mass transit network in urban areas does more to lower emissions than switching powertrains in personal vehicles.

They are already doing this. And building cities out so people down have to travel as far or come downtown. The busses are the main cities are mainly electric and more and more cities are betting metro lines.

Most people use bikes or electric bikes to get to the metro or for short journies (probably at a ratio of 2 to 1) but people still want cars.

In Shanghai and Beijing, you can get an EV instantly but there is a quota for how many new ICE cars are added each month which means you go on a waiting list.

The solution as it relates to poor air quality from the toxic gases emitted from internal combustion engine vehicles in densely populated urban areas. Better?

Mass transit will help, but people are going to buy cars and drive regardless. EVs are clearly the solution to this problem.

This article seems light on numbers and high on assumptions.

Plus what if the consolidation is expected? I mean during the formative days of ICE cars there were way more manufacturers than today...

HN is turning into r/china these days

> 486 EV manufacturers registered in China

That's an incredible amount. I can't imagine the complexity of managing engineering a car, manufacturing, sourcing everything needed.

That's a lot of very ambitious people.

I think you’d have to be fairly naive to believe the tech was all developed in-house, especially in China.

I think OC is talking about operational costs, not research.

Let's say you're half right. Or even 75% right. Or even 90%. That's still a lot of EV companies.

OP didn't mention development

And I think it's just as naive to think there's any merit to criticize where tech comes from

America would not have gotten its start if Samuel Slater hadn't stolen textile production from the old country

If you don't want China to copy your tech, don't hire China to copy your tech.

The barriers isn't as high for EVs as it is for internal combustion engines right? Plus, I doubt they are focused on the consumer market, maybe tractor makers are thrown in there. Then it starts to look a little more reasonable (although it's still nuts)

You could say the same thing about PC manufacturers. Computers are very complicated! But at that scale, I'd wonder if, as with PCs in their heyday, a relatively small number of companies are doing most of the complex work, while the nominal manufacturers were focused more on integration, branding, and tailoring for specific markets.

For what it's worth, the site the link to for that doesn't seem to match their numbers: https://translate.google.com/translate?sl=auto&tl=en&u=https...

I think they just linked to the wrong page, but a quick bit of rummaging didn't turn up anything either, so I'm not sure what we're actually talking about here.

There were a similar number of car manufacturers in the US in the early 1900s. Many of them were essentially assemblers, bolting together parts made by other companies; most of them didn't survive long enough to release a second model.

It's a natural developmental stage in any emerging technology.

https://en.wikipedia.org/wiki/List_of_defunct_automobile_man...

I thought this was an interesting point even if "similar number" was an exaggeration by an order of magnitude. Then I clicked through. Holy shit. If anything it's an underestimate. Hundreds and hundreds of American car companies that lived for what looks like an average of two or three years, clustered around 1910. Seriously, worth taking a look.

Cars were a lot simpler back then though.

An EV is much simpler than an ICE car. Modern EVs use what is known as a "skateboard" platform, with the wheels, powertrain and battery forming a flat package. For western manufacturers, this means that they can build anything from a family car to a panel van on essentially the same platform, massively reducing development costs; Chinese startups can just buy a skateboard as a rolling chassis and bolt a body on top. It's essentially a return to the old body-on-frame approach that dominated prior to the 1960s.

https://www.cnet.com/roadshow/news/skateboard-chassis-electr...

It is a fascinating subject. ICE cars also used to separate platform and body. Coach builders might have been completely separate ones from the rolling chassis makers. Monocoque construction made that harder.

Engines might have been one cylinder side valve arrangements. Electric starters only came around after 1910 or so. Compression ratios and temperatures were low. Cars only had a few gears.

Closer to a pull start lawn mower technologically than a Tesla.

Not compred to the tech of the day. Most pre-war cars had a higher parts-count than a common car made today. Old does not imply simple.

EVs include e-scooters, electric tricycles, airport tarmac vehicles, etc.

Here's my few cents worth. I think this article has got things back to front. Sure, there may be a bubble, but it's nowhere near bursting. Yes, there are fast growth rates predicted for EVs, but they still account for reaching a very small proportion of the overall vehicle market for quite some time. There's every reason to believe that things may change much more dramatically, much more quickly. If this proves to be the case, there is an equally good chance that the number of EV makers could increase equally spectacularly before there is any kind of consolidation in terms of numbers of players. History shows that when we started the journey from horses to automobiles, there was at least one small independent car maker in countless towns and cities at a time when the lack of experience, standard parts or skills meant that the vehicles you built were nowhere near as likely to be reliable or durable as just about any electric car you could build yourself today. In those days it was a challenge to start designing and building a new car (ironically it was almost as likely in the early days that the car engine design would be based upon on electric, steam, gasoline, natural gas or diesel) but today it's actually relatively easy to design and build a car factory. Ok, differentiation might be a challenge if you are going for a low cost market, but guess what, history tells us that localism counts for a lot in nascent automobile markets and 'staying profitable' for a small manufacturer where production costs are as low as they are for making electric vehicles using mostly standard parts may mean that the bubble is going to get a lot bigger, a lot faster and the burst, when it arrives, will probably be much more like a slow leak in a worn-out tire.

Seriously, is there anything in China nowadays that is not a bubble?

Selling goods to the USA, and wine. Chinese red wine is pretty good. Bad wine has this habit of not succeeding.

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