Why Chinese EV Makers Are Expanding in Latin America

[00:00:01] You let him try violin because you love him. And if you love him that much, love him enough to make sure he's buckled up and in the backseat. Find out more at NHTSA.gov slash the right seat. Brought to you by the National Highway Traffic Safety Administration and the Ad Council.

[00:00:18] Welcome to Tech News Briefing. It's Wednesday, November 6th. I'm Cordelia James for The Wall Street Journal.

[00:00:25] Space X's reusable boosters allow it to shoot rockets into the sky again and again and again while cutting the cost of spaceflight.

[00:00:36] We'll find out why the company's rivals are taking notice.

[00:00:40] And then, deterred by tariffs in the U.S. and Europe, Chinese automakers are bringing their business to Latin America.

[00:00:47] WSJ correspondent Samantha Pearson tells us why you're likely to find BYD electric and hybrid vehicles all over Brazil.

[00:00:55] And how China's expansion could impact Western carmakers in the region.

[00:01:04] But first, for decades, almost all rockets have used expendable boosters for space launches.

[00:01:11] But Elon Musk's SpaceX has been using reusable boosters for its Falcon rockets.

[00:01:16] Now, it's looking to advance the tech with Starship, its bigger and more powerful rocket.

[00:01:22] Last month, SpaceX successfully caught its huge Starship booster shortly after liftoff.

[00:01:28] A move like this gives the company an edge over the competition.

[00:01:32] And its rivals are taking notice.

[00:01:35] WSJ reporter Micah Maidenberg joins us now with more.

[00:01:38] Micah, how do rockets with expendable boosters typically work?

[00:01:42] Boosters, of course, are the devices that power the rocket off the ground, defeat gravity, lots of flames.

[00:01:51] Space launches are very exciting.

[00:01:52] But they're used once to basically blast what's called an upper stage into space.

[00:01:58] The upper stage typically could hold a satellite.

[00:02:02] It could hold a crew spacecraft or a cargo spacecraft.

[00:02:07] But the idea is the booster blasts that thing on top of it into space for the in-space mission.

[00:02:13] And the booster, the expendable booster rather, falls away into the ocean and is used a single time.

[00:02:22] Got it.

[00:02:22] So how do reusable boosters work?

[00:02:24] So reusable boosters, namely what we're talking about here is SpaceX's Falcon 9 and Falcon Heavy vehicles.

[00:02:34] Reusable boosters deliver the upper stage, the payload, to sort of the edge of space.

[00:02:40] And then those boosters reverse the whole launch process.

[00:02:44] They zip back to Earth.

[00:02:46] And SpaceX and other companies hope to do this in the future land them on boats.

[00:02:51] They land them on landing pads.

[00:02:54] And they reuse them.

[00:02:56] They refurbish them.

[00:02:57] They fix them up.

[00:02:58] They do checks of the engines, other hardware.

[00:03:01] And they put another upper stage, another payload on top of it and blast off again.

[00:03:06] What are some advantages of these reusable boosters?

[00:03:09] The biggest advantage to reusability is it really helps you to squeeze down costs.

[00:03:15] If you're making an expendable booster or a rocket that's going to be used one time and that's it, you're investing a lot of money into creating something, into bending metal, into getting engines, into doing engineering and tech and prep work to just use that one time.

[00:03:34] And if you are reusing a booster, you don't have to do all that stuff from scratch.

[00:03:38] How are SpaceX's competitors trying to catch up here?

[00:03:42] A bunch of different ways.

[00:03:44] Blue Origin, the space company owned by Jeff Bezos, is working on a reusable booster for its new rocket, which is called New Glenn.

[00:03:53] A company called United Launch Alliance, which is owned by Boeing and Lockheed Martin, has talked about capturing the engines on its booster for its new rocket, which is called Vulcan Centaur.

[00:04:07] And ULA is focused on the engines because the engines are really expensive.

[00:04:13] And maybe you don't have to catch or capture or reuse the entire booster, but if you can get the engines back, refurbish them, install them on another booster, that's sort of a variation of it.

[00:04:24] Rocket Lab, Firefly Aerospace are also working on reusable launch vehicles that would compete with the Falcon 9, and those are still in development.

[00:04:34] The reusability on those vehicles looks somewhat similar to what SpaceX is already doing with its Falcon 9.

[00:04:41] That was our reporter, Micah Maidenberg.

[00:04:44] Coming up, how Brazil became the biggest overseas market for Chinese automaker BYD.

[00:04:50] That's after the break.

[00:05:03] BYD is one of the world's biggest electric vehicle producers.

[00:05:06] But you're unlikely to find its cars in the U.S. or Europe.

[00:05:10] Tariffs have forced Chinese makers of electric and hybrid vehicles to look for other markets, and they've set their sights on Latin America.

[00:05:19] Last year, BYD bought an abandoned Ford plant in Camasari, Brazil, and the company is rapidly transforming it into its Latin American hub.

[00:05:29] WSJ Brazil correspondent Samantha Pearson joins us now with more.

[00:05:33] Samantha, take us back to life in Camasari, Brazil before BYD.

[00:05:38] How are people's lives affected after Ford shut down its factory there in 2021?

[00:05:43] So this is a city of about 300,000 people, which is about the same as Pittsburgh in terms of the number of people living there.

[00:05:50] But it's in a very poor region of Brazil.

[00:05:52] It's in the state of Bahia, where about half the population live under the poverty level.

[00:05:57] But Camasari is or has been made into an industrial city.

[00:06:01] So there's been a lot of tax incentives offered by the government, and they've managed to attract a lot of companies.

[00:06:07] Ford was one of the biggest and the biggest employers.

[00:06:09] The government estimates that about 9,000 jobs were lost because of Ford leaving the country and leaving Camasari.

[00:06:17] And that was jobs at Ford, but also companies that worked with Ford or supplied parts to Ford.

[00:06:22] So it had a really, a really big impact on the city.

[00:06:25] Why did BYD have its sights set on Brazil?

[00:06:28] What makes it a hotspot for the EV business?

[00:06:31] So Brazil is a great consumer market just in terms of its size.

[00:06:35] It's a huge country, more than 200 million people here.

[00:06:38] It's already the sixth biggest automaker in the world.

[00:06:41] But it's also a good base for exporting to the rest of South America because of under Mercosur rules,

[00:06:46] if you make 40% of your car in Brazil, then you can export it to other markets such as Argentina and not pay import tax there.

[00:06:55] So it's an attractive market for many reasons.

[00:06:57] It's also an attractive market because of the supply of lithium.

[00:07:00] So South America holds more than half of the world's known resources of lithium, which is used in electric batteries.

[00:07:07] So the US and to a lesser extent Europe are basically more or less out of bounds for these companies.

[00:07:13] The Biden administration, as you know, they've imposed 100% tariff on Chinese EVs.

[00:07:18] And the future looks like we're going to see similar policies moving forward.

[00:07:23] In Europe, the European Union recently passed tariffs as high as 45% on EVs coming from China.

[00:07:29] So those are very, very difficult markets, which is part of the reason why BYD is expanding in other regions of the world, such as Latin America.

[00:07:37] What happened after BYD bought the abandoned Ford plant last year?

[00:07:42] So they have started building.

[00:07:45] They're spending a lot of money there.

[00:07:46] The company said that they're planning to invest close to a billion dollars on the Camasite plant.

[00:07:51] We couldn't get inside the plant.

[00:07:53] But what we could see on the drone was that most of it is basically being built from scratch.

[00:07:57] So the idea is that they will start assembling cars by the end of this year.

[00:08:02] And initially, 150,000 will be built there.

[00:08:05] And then that will increase to 300,000 by 2028.

[00:08:09] And part of that 10% is going to be exported to the rest of South America.

[00:08:13] How widespread are these cars in the country currently?

[00:08:17] BYD has grown so fast in Brazil.

[00:08:20] Brazil is now BYD's biggest market outside China, which is just amazing, given that only a few years ago, no one had even heard of BYD in Brazil.

[00:08:29] This year so far, between January and September, about 70% of all imported cars were BYD cars.

[00:08:37] And one interesting thing is that in the past, Chinese brands used to be associated with cheapness, low quality.

[00:08:46] They were for people who couldn't afford anything better.

[00:08:48] But nowadays, you see BYD cars parked at luxury shopping malls or outside luxury furniture stores.

[00:08:56] So it's really popular with a lot of different types of people in Brazil.

[00:09:01] Sounds like they're everywhere.

[00:09:02] What are the reasons for that?

[00:09:04] Gas is so expensive in Brazil, much more so if you look at in terms of income compared to the US.

[00:09:11] A lot of people are just doing that calculation.

[00:09:13] You know, if you're not doing big distances and you can afford just to have an electric car and be driving around the city and you don't have to pay for gas, it makes total sense to have an electric car.

[00:09:24] And it's funny, we interviewed so many people and no one, literally no one cited the environmental reason.

[00:09:30] They all were just focused on cost.

[00:09:32] Then also in Sao Paulo, which is Brazil's biggest city, there are traffic restrictions here.

[00:09:38] So one day a week, you're forbidden from driving your car at rush hour.

[00:09:42] But if you have an electric vehicle, you can drive any day of the week, which really makes a big difference.

[00:09:48] What are some barriers to EV adoption in Brazil?

[00:09:51] Brazil is obviously a huge country.

[00:09:54] In Brazil, you can barely leave the state on some of these cars, given how far you can drive them without charging again.

[00:10:01] Charging infrastructure is expensive.

[00:10:03] It has been growing rapidly, but a lot more needs to be done in order for people to feel comfortable buying a car that they can go around the city in, but then they also can do a weekend trip with.

[00:10:13] What has Ford said about BYD and its position in Brazil?

[00:10:16] So recently, the Wall Street Journal interviewed Ford's chief executive, Jim Farley, and he was pretty open on the question of China.

[00:10:25] He said that Chinese car makers represented an existential threat to the company.

[00:10:30] And he wasn't just talking about EV makers such as BYD.

[00:10:33] In fact, he was talking about all Chinese car makers.

[00:10:36] And in Brazil, we've seen a huge number of Chinese cars already being put on the road before electric vehicles became a thing.

[00:10:44] So Chinese car makers were already very aggressive in the region.

[00:10:47] He also pointed to South America as well as Africa.

[00:10:51] But those two regions as kind of make or break markets for Ford.

[00:10:55] Why does it matter if BYD overtakes Western car makers in Latin America?

[00:11:00] Brazilians are buying BYD cars.

[00:11:03] They're very happy with electric vehicles.

[00:11:05] I would say that it is actually more of a problem for the U.S. because this is part of a trend that we're seeing across the region, whereby China is gradually infiltrating itself into every market.

[00:11:19] And the U.S. is losing out.

[00:11:20] Their companies are expanding fast here.

[00:11:23] So it's all kind of part of the biggest story of the U.S. losing out to China in the region.

[00:11:28] That was our Brazil correspondent, Samantha Pearson.

[00:11:31] And that's it for Tech News Briefing.

[00:11:34] Today's show was produced by Julie Chang with supervising producer Catherine Millsop.

[00:11:38] I'm Cordelia James for The Wall Street Journal.

[00:11:41] We'll be back this afternoon with TNB Tech Minute.

[00:11:44] Thanks for listening.