Posted originally on Feb 14, 2025 by Martin Armstrong
There are countless reasons why consumers are reluctant to switch to electric vehicles, with pricing consistently listed as a top concern. Western governments have warned that they will ban fossil fuel vehicle production in the not-so-distant future to meet emissions targets despite lacking the infrastructure or demand for EVs. Every government is hoping that consumers will purchase their new EVs domestically but no one has been able to compete with Chinese EV manufacturing.
China has pumped over $230 billion into its growing EV sector since 2009. Batteries account for around 40% of the total cost of EVs, and companies like BYD are able to maintain low prices are they own the supply chain to create these batteries from the raw materials to the finished packs. BYD has announced that its newest line will cost as little as $9,555, a price no other EV manufacturer has been able to provide.
Additionally, the company has installed its “God’s Eye” driver-assistance system in three models priced under 100,000 yuan ($13,688), providing users with an autonomous driving experience. Yale Zhang, managing director at Automotive Foresight, compared BYD’s developments to DeepSeek, which was developed to compete with ChatGPT at a fraction of the price. “Technology does not need to be high-end and they can fight a price war here,” he stated.
This is especially dire news for Germany and, therefore, Europe, as its auto industry continually declines. Lawmakers refuse to back away from their climate pledges and are forcing manufacturers to make a premature switch without any demand. Volkswagen plans to close at least three factories by 2027 due to declining sales amid the country’s exigency to eliminate fossil fuels, and China has been eyeing their vacant facilities. Germany abandoned economic objectives for climate change objectives and believes it must reduce carbon emissions by 65% within a 5-year period, followed by an 88% reduction into 2040 before meeting gas net neutrality in 2045. China has no such restrictions.
China’s own auto industry grew 156% over a two-year period from 2021 to 2023 after exporting 4.14 million vehicles last year. China is not adhering to the climate change agenda, and those same regulations derived from fictional data are not strangling China’s energy-dependent sectors. Tariffs are preventing the Chinese from offloading EVs to the West.
Even with the 100% tariffs placed on Chinese autos by Canada and the US, this vehicle is far cheaper than any other available EV. These vehicles would be incredibly popular in the West, but rest assured they will find a way to prevent them from being imported or even street legal.
Posted originally on Jan 21, 2025 by Martin Armstrong
Germany’s failing auto sector may prove to be an integral power play for China, as Chinese OEMs are eyeing soon-to-be vacant Volkswagen (VW) factories. Volkswagen plans to close at least three factories by 2027 due to declining sales amid the country’s exigency to eliminate fossil fuels.
Germany once looked to China to offload vehicles, but Chinese-made EVs are drastically more affordable than anything Germany could produce. China provides subsidies for their auto manufacturers, who are able to produce every part necessary for autos domestically. More importantly, Germany has abandoned economic objectives for climate change objectives and believes it must reduce carbon emissions by 65% within a 5-year period, followed by an 88% reduction into 2040 before meeting gas net neutrality in 2045. China has no such restrictions.
China’s own auto industry grew 156% over a two-year period from 2021 to 2023 after exporting 4.14 million vehicles last year. China is not adhering to the climate change agenda, and those same regulations derived from fictional data are not strangling China’s energy-dependent sectors. Tariffs are preventing the Chinese from offloading EVs to the West.
Chinese OEMsare discussing bypassing some tariffs by producing vehicles directly in Germany. One anonymous source told Reuters that a Chinese manufacturer already has plans to purchase a factory in Osnabrueck.
Stephan Soldanski, a union representative from Osnabrueck, said that he believes union workers would have no problem working for a joint venture. The VW closures alone are expected to reduce the workforce by at least 2,500, with 120,000 already receiving a large pay cut ahead of closures. Soldanski also noted that workers would want to continue producing VW vehicles, calling it a “key condition,” but Germany would need to be willing to allow China to infiltrate its most iconic auto producer.
“We are committed to finding a continued use for the site. The goal must be a viable solution that takes into account the interests of the company and employees,” a VW spokesperson said without providing specifics. The company would save money if they sold rather than shut down, but the company’s best interest clearly does not align with the nation’s best interest or the EU’s.
“China has introduced a series of opening-up measures to create new business opportunities for foreign companies … It is hoped that the German side will also uphold an open mind, (and) provide a fair, just and non-discriminatory business environment for Chinese firms to invest,” a spokesperson from the Chinese side of the negotiating table told Reuters.
It would be monumental for China to take on a stronghold of Germany’s auto sector. Lawmakers are certainly devising ways to prevent this from taking place. Forget Chinese influence, if China were to begin overtaking Germany’s most prominent sector, the entire EU would be at risk. I do not believe Germany or the EU would allow this to happen, as the entire West has made it clear that China is their top competitor, if not an outright enemy. Governments see China’s rapid rise and are desperately attempting to prevent it from becoming the next financial capital of the world.
Posted originally on Jan 13, 2025 by Martin Armstrong
QUESTION: Thank you so much for your world forecasts. It is very helpful to be able to read you here in China. You said that deflation is in motion into 2028. People are cutting back on spending and your model has been correct here in China. Could you provide a quick overview for 2025?
DZ
ANSWER: President Xi Jinping has acknowledged that 2025 will be a challenging year of reform. He’s not wrong, at least about the second point. Deflation remains the major problem going into 2028. Prices are indeed falling as households curtail their spending. We are all human, and as soon as economic uncertainty appears on the horizon, people will hoard their cash. This is self-evident from ancient times.
I am doing my best to try to explain to anyone who will listen that this hair brain idea of Trump and tariffs will bring about an economic depression as we move into 2028 and he has the risk that his legacy will match that of Herbert Hoover. There were the Sovereign Defaults of 1931 and that wiped out capital formation. That was the major cause of more than 9,000 bank failures in the USA. We also face massive sovereign defaults, with the worst in Japan and Europe. Add tariffs to this bearish economic outlook, and Trump will export deflation, and with that, the US will also not be able to see overseas. The entire world’s GDP will decline by about 20%.
The People’s Bank of China is as trapped as the rest of the central banks, and it will be unable to stop the deflation without adopting a new economic theory. We are approaching 2026, which will be an important year for our models, and it is even 72 years from the formation of the Chinese Constitution, which was enacted on September 20th, 1954, with the first meeting of the National People’s Congress in Beijing unanimously approval the 1954 Constitution of the People’s Republic of China. It was a matter of weeks when, on October 1st, 1954, The China Construction Bank was founded.
Canada was the first central bank to cut rates within days of this Economic Confidence Model turning on May 7th, 2024. Overall, we are in a deflationary atmosphere into 2028. With regard to China, the downturn can be hard for two years into 2026.
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