Chinese carmakers have struck fear in automotive companies across the globe.
“If there are no trade barriers established, they will pretty much demolish most other car companies in the world,” Tesla CEO Elon Musk told investors last month. “They’re extremely good.”
Tesla was recently overtaken by China’s BYD—backed by Warren Buffett’s Berkshire Hathaway—in global sales of electric vehicles.
Some of the nicer electric vehicles made in China are generating interest among well-heeled car buyers in other nations—including in smaller countries where the vehicles are not yet officially sold. That’s opened the door for individual traders who can act more nimbly than the carmakers themselves, taking advantage of a loophole.
As Rest of World reports, such traders are registering vehicles in China before sending them to eager fans overseas in countries like Kazakhstan and Saudi Arabia. That way, the vehicles are technically secondhand ones, in which case no authorization from the carmaker is required.
Through this means, buyers overseas acquire trendy Chinese EVs that are often viewed as status symbols, including higher-end models from BYD, Li Auto, and Zeekr (Geely’s premium EV brand). Of course, they pay a premium to do so, and could encounter difficulties with repairs when the carmakers themselves haven’t established a local presence yet.
“Chinese cars are getting really popular,” a car exporter in China’s northern province of Hebei told Rest of World. “Big screens, interactive features, hidden door handles, voice control, massage chairs—all these things can be very attractive.”
To be sure, it is the desire for the more attractive Chinese models, not the ultra-affordable ones, that this grey market caters to. And of course, the grey market will serve less of a purpose over time as Chinese carmakers establish operations in ever more countries.
But the desire for and awareness of such models among buyers in far-flung nations speaks to the ability of Chinese carmakers to compete at both the high and low end of the market.
Musk himself has gone from laughing about the quality of BYD cars in 2011 to suggesting recently that Chinese companies will emerge as dominant players in the global automotive industry.
Last summer, Ford Motor executive chairman Bill Ford Jr. warned that American automakers are “not quite yet ready” to compete with Chinese rivals on EVs. “They developed very quickly, and they’ve developed them in large scale, and now they are exporting,” he told CNN. “They are not here, but they will come here we think at some point and we need to be ready.”
This story was originally featured on Fortune.com
