Debate:?Is US Industrial Policy Working for Mobility?
Debate Summary:
It is working (initial argument from Justin Savage)
The US industrial policy has two main goals. The first is to increase domestic manufacturing due to its societal benefits. This is also to address concerns about economic depression in previously manufacturing-heavy communities. The second goal cited is national security. Lessons drawn from conflicts like the potential for a war between China and Taiwan underscore the need for the US to have local manufacturing capabilities.
In recent years, government regulations geared towards boosting domestic production have been passed. Legislations such as the bipartisan infrastructure law of 2021, the Chips Act of 2022, and the Inflation Reduction Act have created various funding pools and incentives to spur local manufacturing. There are also measures to set up barriers in the sector and establish cyber standards for connected vehicles as seen in the proposed rulemaking by the Department of Commerce Bureau and Industry Security. These regulations seem tailored to restrict economic competitors, primarily China.
Moreover, the government is working on ensuring the sustainability of the auto and mobility sector in the US. This is done through mandates like the California Air Resources Board's battery mandates, the EPA's CO2 standards, and DOT CAFE standards. While the speaker acknowledges the need for competition, particularly with China, they emphasize that a single company should not compete against an entire country. This shows the need for regulations that level the playing field in the mobility sector.
It is not working (initial argument from Bill Russo)
China's approach has made it the leader in mobility. The speaker highlighted that unlike the US, China identified mobility innovation as a driving characteristic of the world's leading economies and allocated resources towards realizing this. An example given was their decision to prioritize investment in infrastructure needed to scale new propulsion technologies and take concrete measures to decrease dependence on oil and gas as recurring energy sources. Notably, China implemented a long-term plan to phase out combustion engine vehicles, a move not mirrored by the US.
The speaker stressed China's long-term commitment to electrification, demonstrated by the significant investments in infrastructure before the widespread acceptance of electric vehicles (EVs), and the creation of a strong battery supply chain. As a result, 70% of the world's EV battery capacity, by the end of last year, was based in China. Furthermore, Chinese companies dominate in the processing of crucial materials required for these batteries. Conversely, the US lacks such infrastructure, which has in part stalled the adoption of EVs in the country.
Despite criticism, the speaker confirmed China is leading the race to a future dominated by electric transportation. From zero representation in 2010, there are now thirteen Chinese companies in the top 100 list of suppliers, whilst the US side has experienced a decline in this area. This evolution is also seen in internal combustion engine vehicle sales, which have significantly reduced, and new energy vehicle sales, boosted by policy shifts allowing foreign ownership of EV production factories, have increased substantially.
In conclusion, the speaker suggests that decoupling from Chinese supply chains is not a viable solution for the US; instead, they should compete directly, advancing faster to emerge triumphant.
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Further discussion
The speakers largely agree that it's still unclear what form the US industrial policy should take, with potential solutions ranging from a blend of incentives and prohibitions to mirroring China's own strategy more closely. However, they stress a difference in the political landscape of US and China which can impact policy execution. The speakers also highlight potential obstacles in the US, such as the extensive time needed for public infrastructure and energy deficit issues.
US is in a difficult position needing to compete but also reliant on China's battery supply chain. Creating financial incentives for Chinese suppliers to pursue licensing deals in the US is suggested as a potential solution, although it's acknowledged that completely excluding Chinese suppliers would render competition impossible. Some attraction to a collaboration approach is shown, pointing toward Chinese strength, resulting from goal-focused policies and public-private partnerships, which have led to domestic competitive advantages and energy security.
However, there are some concerns voiced over traditional industrial policies. Particularly, the government's perceived poor track record of choosing winners and losers effectively is called into question. This creates challenges in apportioning resources and subsidies, especially when it comes to supporting smaller startups.
The US and Europe have significantly limited their incentives for the import of vehicles produced in regions like China that heavily rely on coal and consequently have larger carbon footprints. This disrupts the conception of a level playing field and calls for global uniformity in the regulation and incentivization of sustainable mobility.
A speaker suggests that the lack of an industrial policy in the US equates to having a detrimental industrial policy. Emphasizing the necessity for more American involvement in emerging mobility technologies and industries, the argument is made that the country does not currently have the engineering talent or labor resources necessary to sustain a self-reliant mobility industry. The speaker concludes that for the US to regain its economic dominance, it needs to create an environment welcoming of foreign investment, preferably Chinese, and promote American entrepreneurship.
A speaker highlights the contrast between the continuous governance approach in China and the political polarization in the US, resulting in inconsistent and ineffective industrial policies and strategies. There is a call to reestablish American economic dominance in order to navigate the increasingly competitive global economies. The speaker conveys that while policy can significantly contribute to the direction of industrial evolution, with China as an example, it should not be the sole factor determining change. Rather, a merger of public and private interests should direct the transformation.
About Bill Russo
Bill Russo?is the Founder and CEO of Automobility Limited, and is currently serving as the Chairman of the Automotive Committee at the American Chamber of Commerce in Shanghai. His over 40 years of experience includes 15 years as an automotive executive with Chrysler, including 21 years of experience in China and Asia. He has also worked nearly 12 years in the electronics and information technology industries with IBM and Harman. He has worked as an advisor and consultant for numerous multinational and local Chinese firms in the formulation and implementation of their global market and product strategies.
Bill is a contributing author to the book Selling to China: Stories of Success, Failure, and Constant Change (2023), where he describes how China has become the most commercially innovative place to do business in the world’s auto industry - and why those hoping to compete globally must continue to be in the market.