How China Impacts Volkswagen & Tesla Electric Car Manufacturing

People complain all the time that CleanTechnica spends too much time writing about politics, without stopping to consider the impact of politics on where electric car manufacturing takes place. Just today, there are reports about Volkswagen considering a second manufacturing facility in the US and Tesla pondering a factory in India. China plays a prominent role in both decisions. Here’s more.

Volkswagen Thinking Of Second US Factory

For years, Volkswagen has faced languishing sales in the US. The diesel cheating scandal that began in 2015 has been an ongoing drag on US sales. Last year, VW’s market share in America was a dismal 2.5%. Volkswagen Group CEO Herbert Diess thinks his company’s electric car offerings could help turn things around in North America.

For many years, Volkswagen has built cars at its factory in Chattanooga, Tennessee. Now, it is expanding that factory to add a second production hall for EVs, the first of which will be the ID.4 and possibly the mechanically identical but somewhat sleeker ID.5. The first US-built ID.4 cars are due in showrooms this fall.

Germany’s Manager Magazin attended a presentation recently by Diess in which he suggested a number of new directions the company is considering in America. First, the feasibility of building a battery cell factory near the Chattanooga site is being explored.

One of the things the company needs to decide is whether it will build its own battery cells or partner with SK Innovation, which is currently designated to be the supplier for battery cells for cars built in Tennessee. Diess also suggested a second US factory — possibly also located in Chattanooga — which would expand the company’s EV manufacturing capacity in America to around 600,000 cars annually.

“The new America offensive is a reaction to the new geopolitical situation,” Manager Magazin claims. “The war in Ukraine is particularly harmful to Europe, according to Wolfsburg. The importance of having a strong presence throughout the rest of the world is becoming correspondingly more important. In order to reduce dependence on China at the same time, the automaker wants to strengthen its US business.”

So there you have it — the elephant in the room. Ever since the end of World War II, one or the basic tenets of globalization has been that countries that are bound together by commerce don’t engage in armed conflict. The lunatic dictator for life in Russia has just exploded that notion and exposed it as nothing more than a myth. In the space of a few weeks, 70 years of post-war economic stability has gone out of the window and forced a painful re-examination of old shibboleths.

A second US factory invites all sorts of interesting new ideas. Could the new ID. Buzz be manufactured there? Or perhaps the rumored electric pickup truck that has been in the news lately? Last year, a Volkswagen exec hinted the ID. Buzz might be manufactured in Mexico, but that was before Herr Diess’ brain started generating new ideas.

Tesla & India

Tesla would love to sell its cars in India. India would love to have Tesla automobiles for sale to its citizens, but it wants Tesla to manufacture them in the country, not import them from its factory in Shanghai. As things stand, India imposes import duties of up to 100% on foreign-made automobiles. As good as Tesla cars are, it’s unlikely many people will pay double to own one.

According to Reuters, Nitin Gadkari, an official in the government of India, said at a press conference this week, “Making in China and selling here is not a good proposition.” Translation — ain’t gonna happen. That announcement is in line with Prime Minister Modi’s “Make In India” program.

The Takeaway

China is at the center of all these policy considerations because it, more than any other major nation, has embraced the electric car revolution. As a result, it manufacturers more EVs than any other country and controls many of the raw materials needed to build them. While Russia is carving up Ukraine and has set its eyes on other former Soviet socialist republics, China is rapidly weaponizing the South China Sea and casting covetous eyes toward Taiwan.

While its electric car manufacturers have designs on world markets, the national government has designs on world domination. All of which makes navigating the waters of international commerce more problematic for companies like Volkswagen and Tesla. Still think politics don’t matter when it comes to the EV revolution? Think again.


 


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