The ‘Godfather of EVs’ explains why China is winning the race to go electric — and why hybrids are a ‘fool’s errand’

According to one study, the Chinese government has spent at least $230 billion on subsidies for electric vehicle makers since 2009.

Palmer, who previously served on the board of Dongfeng Motor Company, a joint venture between Nissan and Chinese state-owned automaker Dongfeng, says he saw firsthand how aggressive China’s EV strategy was.

“The edict [from the Chinese government] was to move to new energy vehicles,” he said.

“It starts with an industrial strategy. That’s the big thing to learn. For the best part of 14 years, we have not had an industrial strategy,” Palmer added.

Both the US and Europe have responded to the rise of Chinese automakers by imposing tariffs aimed at protecting their own auto industries, but Palmer said that tariffs would only harm Western companies’ ability to compete with their Chinese rivals.

“My experience with tariffs is it just makes your indigenous industry lazy. The gap becomes even bigger,” he said.

Instead, he argued that automakers should prepare for a “survival of the fittest” battle with Chinese automakers, especially in Europe, where the likes of BYD and Xpeng have ambitious expansion plans.

“I think the Chinese firms will learn from competing in Europe, because that’s the toughest market in the world. If they can do that, then they’re going to be unbeatable,” Palmer said.

The surging growth of China’s EV giants has put Palmer’s former employer Nissan and its Japanese rivals Toyota and Honda under severe pressure.

Nissan announced it would lay off 9,000 workers in November, while both Toyota and Honda are facing declining sales in China and slumping profits. In December, it was reported that Nissan and Honda were in merger talks.

Palmer says while Toyota’s decision to focus on hybrids paid off initially, it has left it and other Japanese automakers exposed as key markets like China transition quickly to EVs.

“Toyota took the Japanese industry down a cul-de-sac, which it is going to struggle to recover from,” he said.

The former Nissan executive said his old company, meanwhile, had “shot itself in the foot” and squandered a promising lineup of electric vehicles and a 10-year lead in EV tech.

“My last board meeting in July 2014, I was under enormous attack from the bean counters who were saying; these things don’t make money, we are going too fast. I managed to win the day in that meeting, but I left the company,” said Palmer.

“Nissan finds itself now with a very poor lineup of products and without obvious leadership in EVs, and that’s the direct result of poor management,” he said.

The past year has been tough for electric vehicles. While sales are still growing, the pace of adoption has been slower than expected, causing automakers across the globe to roll back investments.

For Palmer, the reason some consumers have proven reluctant to go electric is simple: EVs are too expensive.

“Prices have got to align to those of internal combustion engines. And to make that happen, you’ve got to be able to offer cars with smaller batteries,” said Palmer.

The average price of an electric vehicle in the US in October was $56,902, according to Kelley Blue Book, compared to $48,623 for gas-powered vehicles.

Palmer said that selling cheaper vehicles with smaller batteries and less range would require governments to incentivize the rollout of charging networks to alleviate range anxiety.

He added that the West could learn from China’s approach to industrial strategy — especially when it comes to batteries, an industry that China dominates.

“If the West wants to catch up, I would advocate copying the Chinese,” said Palmer.

“The alternative is everything is Chinese at the moment — even if you were building your own battery cells, you’ve still gotta get all the minerals from China. The whole supply chain is stuck,” he said.

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