Electric Vehicles And the New Cold War

There has been a lot of discussion in the past period on how chips have been the latest trade war among key economies and against China.

With Trump’s re-election, these discussions are ramping up but most importantly around EVs (electric vehicles). Elon Musk has positioned himself to be Trump’s loudest voice in his ear in regards to key decisions about policy and his cabinet picks. Why is Elon so involved this election cycle? Because he sees Tesla as a part of the global war on electric vehicle dominance and self-driving technology. He believes his $118 million that he donated to support Trump will help increase his influence and help position himself in the upcoming trade wars.

The Current State of the Market – China Dominance

As you drive and live across the United States you won’t go long without seeing a Tesla vehicle. In California the Tesla Model 3 and Model Y are among the best selling vehicles among all EV cars in 2024. Beyond the United States borders, it is a different story. Currently, China’s EVs are outselling Tesla and other automakers by a wide margin. Roughly half of all EV sales globally come from Chinese automakers with BYD being the top selling worldwide.

In Europe, Chinese made electric vehicles already are on track to be 11 percent of all EV sales in Europe. There are plans to build factories in Spain, Poland, and Hungary from China based companies. As a result Europe has responded with 25 percent tariffs with tensions building for further clashes.

Tesla, which has been making inroads in Europe as well, has been feeling the pressure from Chinese EV companies and pushback from homegrown automakers like Volkwagen and Mercedes.

This has sparked a new battle among the United States and China. As a result of their growing dominance, in 2018 Trump instituted new tariffs on EVs from China set at 25 percent. In 2024, Biden raised the tariff to 100 percent to further stop China from selling their EVs that can be built for significantly less than in other parts of the world.

China’s dominance really shows in its control of materials, the supply chain, and battery technology. Through companies like CATL (Contemporary Amperex Technology Co. Ltd.) China already produces 70 percent of the world’s batteries, an astonishing amount in a young market. 85 percent of anodes and 60 percent of cathodes, a key battery component, are made in China. Furthermore, 75 percent of the cobalt materials in the world are produced by China but mined in countries like the DRC. China’s strongest competitive edge is its reliance on cheap labor and its ability to lower costs on batteries which allows them to sell their cars 40 percent less than other manufacturers like in the United States.

Decline of the West

As the EV market heats up, this is occurring during a very difficult time for western auto manufacturers. Many of the American based auto manufacturers have never recovered from the rise of the Japanese auto manufacturers that flooded the US market with reliable and fuel efficient cars in the 80s and 90s.

Years later we have seen Ford stop selling most of their car portfolio, Chevy had to be bailed out in the Great Recession and in 2014 the Fiat Group bought out all of the Chrysler group which contains brands like Dodge and Jeep.

The issues extend to Europe. Volkswagen (VW) is facing significant labor unrest in Germany, with workers striking across several plants in protest against proposed layoffs, factory closures, and wage reductions. The company announced cost-cutting measures, including the closure of at least three factories, as part of its strategy to cope with declining demand for EVs and rising production costs. The strikes, organized by the IG Metall union, have escalated as workers demand better compensation and job security in light of VW’s plans to restructure. Union leaders argue that the company’s focus on cost-cutting is disproportionately affecting workers and propose alternatives like freezing executive bonuses and reducing working hours instead of layoffs​.

Tesla and the tech sector saw the EV market as a new way to position the US auto sector as a leader in the world. Tesla in the past ten years has quickly built up their position by being early into the market. The rise of the Chinese EVs has put their dominance into question. Elon Musk and the United States would like to protect what is left of the auto industry. Self driving technology and artificial intelligence are positioned to be a major part of future economies. The United States does not want to miss out on dominating this market and is already falling behind.

Trump And The Oncoming Trade War

When Trump takes office he is poised to make more sweeping tariffs against trade partners. Current President Joe Biden has already increased the tariffs to 100 percent for Chinese EVs. In response, China is hoping to build factories in places like Mexico to get around the tariffs. If China can qualify under the criteria for United States-Mexico-Canada Agreement (USMCA). They can then send EVs into the US with no tariffs. It is very likely Trump is going to target USMCA to prevent EVs from Chinese companies entering the US.

This trade war is an example of the broader war between nations. China and the United States want control of the market and use emerging markets to expand their influence. Whoever can export more capital can end up influencing that country greatly. We have seen China aggressively move into markets in Latin America and Africa to broaden its influence.

Lenin talks in length in his book Imperialism: The Highest Stage of Capitalism about capitalism’s need to expand. China and the United States use capitalism and state intervention to expand not only capital but political influence. These countries exploit other countries for their resources such as China exploiting Africa for its cobalt. Capitalism seeks never ending profit and influence to grow.

Electric Vehicles and a Socialist Solution

Let’s not forget that electric vehicles are offered up to us as part of the solution to climate change. They don’t rely as much on oil reserves which has been a great source of tension in the past few decades.

But we must remind ourselves companies like BYD and Telsa aren’t just out to save the planet. They are for profit companies seeking to use their resources to dominate markets. This is part of the growing green capitalism movement.

The EV trade war is not a fight for a sustainable future, but a battle for market supremacy under capitalism. Sure there are benefits but it exposes the inability of capitalist powers to prioritize humanity’s needs over their own economic and geopolitical ambitions. Workers in all nations whether it is Germany, the US, Mexico, or China are all exploited under this same system. A socialist approach to the climate crisis would reject nationalist competition in favor of an international plan to transition to renewable energy. By placing the EV industry and the broader economy under workers’ democratic control, humanity can prioritize sustainability, equity, and the survival of our planet over profit and power.