Small, well-built Chinese electric vehicles pose a major threat to the US auto industry

LIVONIA, Mich. (AP) — A small, low-cost electric car called the Seagull has American automakers and politicians jittering.

The car, launched last year by Chinese automaker BYD, sells for about $12,000 in China, but runs well and is built with craftsmanship that rivals U.S.-made electric vehicles that cost three times as much. . A short-range version costs less than $10,000.

Tariffs on imported Chinese vehicles will likely keep the Seagull off US shores for now, and if imported it would probably sell for more than 12 grand.

But the rapid emergence of low-cost EVs from China could shake up the global auto industry in a way not seen since the explosion of Japanese manufacturers during the 1970s oil crisis. BYD, which stands for “Build Your Dreams,” could be a nightmare for the American auto industry.

“Any car company that's not paying attention to them as a competitor is going to lose out when it comes to their market,” said Sam Fiorani, vice president of AutoForecast Solutions near Philadelphia. “BYD's entry into the US market is no easy matter. It's a time.”

US politicians and manufacturers already see Chinese EVs as a serious threat. On Tuesday, the Biden administration is expected to announce 100 percent tariffs on electric vehicles imported from China, saying they threaten American jobs and national security.

Read more: China to challenge Biden's electric vehicle plan at WTO

The Alliance for American Manufacturing said in a paper that government-subsidized Chinese EVs “could be an extinction-level event for the US auto sector.”

Earlier this year, Tesla CEO Elon Musk told industry analysts that Chinese EVs are so good that without trade barriers, “they would pretty much demolish most other car companies in the world.”

Outside China, EVs are often expensive, aimed at a high-income niche market. But Chinese brands that aren't yet global household names are offering affordable alternatives that will appeal to the masses – just as US, European and many other governments look to move away from gasoline-powered vehicles to fight climate change. Are encouraging.

“Western markets have not democratized EVs. They civilized EVs, said Bill Russo, founder of Automobility Limited Consultancy in Shanghai. “And when you show gentrification, you limit the size of the market. China is all about democratizing EVs, and this is what will ultimately help Chinese companies succeed globally.

Inside a giant garage in an industrial area west of Detroit, a company called CareSoft Global tore apart a seagull that its China office had purchased and shipped to the United States.

Company President Terry Woychowski, a former chief engineer for large pickup trucks at General Motors, said the car is a “clarion call” to the U.S. auto industry, which is years behind China in designing low-cost EVs.

After the vandalism, Woychowski, who has been in the auto business for 45 years, said he was left wondering whether American automakers could adjust. “Things have to change in some fundamental ways to be able to compete,” he said.

There's no miracle that explains how BYD can build the Seagull at such a low cost. Instead, Woychowski said the entire car, which can go up to 252 miles (405 kilometers) per charge, is “an exercise in efficiency.”

High US labor costs are just part of the equation. BYD can keep costs low because of its expertise in making batteries – primarily for consumer products – that use lithium iron phosphate chemistry. They cost less but have a shorter range than most existing lithium-ion batteries.

Americans are still learning how to make cheap batteries, Woychowski said. Ford is building a lithium iron phosphate battery factory using technology from China's CATL.

BYD makes many of its own parts, including the electric motor, dashboard, body and even headlights. It also has the advantage of sheer scale – 3 million vehicles were sold worldwide last year.

“Having it all in-house and vertically integrated has given them an incredible advantage,” Woychowski said.

BYD designs all aspects of its vehicles with cost and efficiency in mind. For example, the Seagull has only one windshield wiper, eliminating one motor and one arm, saving weight, cost, and labor to install.

American automakers often don't design vehicles this way and incur additional engineering costs, Woychowski said. For example, hoses have to meet long-term requirements in combustion engines for strength and ability to carry fluids at high pressure, many of which are not required for electric vehicles, he said.

There are weight savings, allowing the Seagull to travel farther per charge on a smaller battery. For example, the Seagull tested by CareSoft weighs 2,734 pounds (1,240 kg), about 900 pounds less than the Chevrolet Bolt, a slightly larger electric vehicle made by GM.

So Detroit needed to quickly relearn a lot of design and engineering to keep up while abandoning a century of vehicle manufacturing practices. The trick, he said, will be determining which processes are in place for safety and quality and which processes are eliminated because they are not needed.

“You have to come in and be very serious about this, and you better leave your paradigm at the door,” Woychowski said. “Because you have to do things differently.”

Even with its minimalist design, the Seagull still has a feel of quality. The doors close tightly. The stitching on the gray synthetic leather seats matches the bright green body color, a feature typically found in more expensive cars. The Seagull “Flying Edition” tested by Caresoft has six air bags, rear disc brakes and electronic stability control.

A brief drive through a few connected parking lots by a reporter showed that it runs quietly and handles turns and bumps as well as more expensive electric vehicles.

Although acceleration isn't as fast as other EVs, the Seagull is nimble and will have no problem entering the freeway in heavy traffic. Woychowski says its top speed is limited to 81 mph (130 kph).

BYD must modify its cars to meet US safety standards, which are more stringent than China's. Woychowski says CareSoft hasn't done a crash test, but he estimates it would add a few thousand dollars to the cost.

BYD sells the Seagull, which has been rebranded as the Dolphin Mini in some overseas markets, in four Latin American countries for about $21,000, twice the domestic price. The higher price includes transportation costs, but also reflects potentially higher profits in less tough markets than China.

In Europe, BYD offers larger models like the Sealed, which starts at 46,990 euros ($50,000) in France. The Chinese manufacturer's top two overseas markets in the first two months of this year were Thailand and Brazil, according to the China Passenger Car Association.

BYD makes electric buses in California and told the AP last year that it was “still in the process” of whether to sell the autos in the US. It is weighing sites for a factory in Mexico, but it will be for the Mexican market, two company executives said in media interviews earlier this year.

The company is not selling cars in the US, mainly because of a 27.5 percent tariff on the selling price of Chinese vehicles when they arrive at ports. When Donald Trump was president, he imposed the bulk of the tariffs, 25 percent, and that was kept in place under Joe Biden. Trump argues that the rise of EVs, championed by Biden, will eliminate American factory jobs, sending the work to China.

The Biden administration has supported legislation and policies to build a US EV manufacturing base. The administration is also investigating cars made in China that may collect sensitive information.

Some members of Congress are urging Biden to ban imports of Chinese vehicles, while others have proposed even higher tariffs. This includes vehicles made in Mexico by Chinese companies that will now come largely without tariffs.

Ford CEO Jim Farley has overseen CareSoft's work on Seagull and witnessed BYD's rapid growth around the world, particularly in Europe, where he ran Ford's operations. He is going to change his company. He told analysts earlier this year that a small “skunkworks” team is designing a new, smaller EV from the ground up to keep costs low and quality high.

Chinese manufacturers sold almost no EVs in Europe two years ago, Farley said, but now they have 10 percent of the electric vehicle market. They will likely export around the world and possibly sell in the US

Ford is preparing to counter it. “Don’t take anything for granted,” Farley said. “That's not what the CEO does.”

Associated Press writers Paul Wiseman and Didi Tang in Washington contributed to this report. Moritsugu reported from Beijing.

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