Thermodynamics of hypocrisy

We have a focus problem.

Generalist media and marketing narratives have trained us to fixate on the shiny object: the electric car, the lithium battery, the technological futurism of Shenzhen. Classic sleight of hand. While you watch the right hand, the left redraws the map.

It is a pattern I recognise from decades of observation. When everyone looks in the same direction, informational value almost always lies elsewhere. Not due to conspiracy, simply the economics of attention. What is obvious is already priced in. What is ignored contains arbitrage.

Recent customs data tells a different story. Not press releases, actual shipping manifests, the kind of information that emerges when you stop reading corporate communications and start looking at port registries. China is not merely flooding the world with the future. It is flooding the world with the past. Millions of internal combustion vehicles are leaving Chinese ports. Petrol. Diesel. Technology we have declared obsolete. They are not coming to us. They are going everywhere except to us.

The numbers nobody watches

The numbers are stark: 78% of Chinese automotive exports in 2024 were internal combustion engines. Nearly five million units shipped to Russia, Mexico, the Middle East, Brazil, Southeast Asia. This while domestic electric penetration exceeded 50%. The symmetry is not accidental.

It is worth dwelling on this asymmetry. In China, by December 2024, over half of cars sold had a plug. The domestic market is completing a transition we are still debating. Meanwhile, four out of five cars leaving Chinese ports burn petrol. Opposite directions, unified strategy.

The destination markets tell a precise story. In South Africa, Chinese brands represent nearly 10% of sales, five times the 2019 volume. In Turkey, 8% market share from virtually zero in 2022. In Chile, a third of the market for several years running. In Thailand, Toyota's traditional stronghold, Chinese share has climbed to 13% in two years. These are not infiltrations. This is systematic conquest.

Physics does not negotiate

Physics applies to economics. It is one of the few things I have learnt not to question after forty years. You cannot eliminate inefficiency by decree without paying somewhere. Entropy must go somewhere.

China decided to pivot its domestic market toward electric, and over half of cars sold there now have a plug. But twenty years of industrial infrastructure designed for thirty million combustion engines annually does not vanish because Beijing changed direction. Those factories, supply chains, metallurgical capabilities become what we might call structurally undead. Capable of production, orphaned of domestic demand.

The Council on Foreign Relations estimates that China has production capacity for over forty million combustion vehicles. Forty million. In a domestic market that now absorbs fewer than fifteen million, and declining. The mathematics is merciless: either you close, or you export. Tertium non datur.

The Western prescription would be creative destruction: closures, bankruptcies, market reset through bloodshed. It is our economic gospel. Let the market do its work. The weak die, the strong survive, the system rebalances.

China operates differently. Fifty thousand skilled workers on the streets in Chongqing is not an accounting problem. It is an existential threat to the only currency that matters: political stability. In an authoritarian system, mass unemployment is not an economic datum. It is regime risk.

Social shock absorbers on four wheels

So production continues. Margins are irrelevant. The state keeps these production lines alive not for profit, but for social absorption. Every car sold below cost in Jakarta or Lagos is an insurance premium against unrest in Shanghai.

It is a perfect transfer mechanism. The global consumer obtains low-cost mobility. China obtains social peace. Western manufacturers get squeezed out of markets they never took seriously. Who loses? Carmakers that must turn a profit to survive, whilst competing against companies without that constraint.

I have seen this pattern in other sectors. When a player can operate without profitability requirements, the market ceases to be a market. It becomes a war of attrition where victory goes to whoever has the deepest pockets and the longest time horizon. The Chinese state has both.

The analogue beachhead

There is a deeper layer, one that any game theory analyst would recognise immediately.

While Europe imposes Euro 7 and sets expiry dates, while America erects tariff barriers against Chinese electric vehicles, a vacuum opens across three continents. The Global South lacks charging infrastructure. It lacks reliable electrical grids. It has roads, petrol stations, and populations that want to move. China noticed. We did not.

We decided, in our ideological arrogance, that the entire world wants to go green tomorrow morning. We imposed Euro 7 standards, set expiry dates, raised our car prices to levels unsustainable for the global middle class. All in the name of virtue. The result? We left a power vacuum the size of three continents.

While we sell the ideology of sustainability, China sells the reality of mobility.

When you sell a million cars in a region, you have not merely moved metal. You have imposed a standard. Spare parts. Mechanics trained on your schematics. Service networks. Distribution channels. Relationships with dealerships, finance providers, insurers. It is an ecosystem.

It is technological lock-in executed with combustion engines as the beachhead. Today the $10,000 petrol SUV, the one the average Lagos consumer can afford. Tomorrow, when local competition has vanished and loyalty is built, the electric successor. At that point, who else would they buy from?

What the Japanese already showed us

The pattern is familiar. The Japanese and Koreans did precisely this, decades ago. Toyota did not become Toyota by selling Lexus in Oklahoma. It became Toyota by selling reliable, affordable Corollas wherever there was a road. First you conquer the mass market. Then you move upmarket.

But China adds something its predecessors lacked: the software layer, the features, the sophistication that emerging market consumers never received from legacy brands. A Chinese car costing $15,000 today has screens, connectivity, driver assistance systems that traditional manufacturers reserved for premium segments.

It is the same advantage Chinese smartphones used to conquer Africa and Southeast Asia. Flagship functionality at entry-level pricing. The formula works because these markets never had access to the high end. They do not know what they are missing. They only know what they are getting.

The purity test versus the war of movement

We are conducting a purity test while they conduct a war of movement. Our tariffs target the future. Their strategy captures the present. The mathematics of global mobility demand does not care about our regulatory timetables.

What strikes me is the selective blindness. We discuss tariffs on Chinese electric vehicles as though they were the main front. We celebrate every barrier as a victory. We fail to understand they are a feint.

The real campaign uses weapons we have already declared obsolete, in territories we have already abandoned. While we barricade ourselves in our green fortress, China conquers all surrounding territory with conventional weapons. When the Global South is ready for electrification, in ten, fifteen, twenty years, the physical, commercial and psychological infrastructure will be Chinese.

It is not a conspiracy. It is emergent strategy from aligned incentives. Every Chinese actor, the state seeking stability, the factories seeking survival, the workers seeking wages, naturally converges on the same solution. Export the entropy.

Systems that work

Thermodynamics, again: matter does not disappear. It moves. While we congratulate ourselves on our green credentials, millions of Chinese pistons are firing on streets from Lagos to St Petersburg. China is building tomorrow's roads by selling yesterday's cars. And using the proceeds to fund the research that will render our industries definitively redundant.

Next time you read a triumphalist headline about how Europe is "stopping" the Chinese invasion with tariffs, remember thermodynamics. Remember you are watching the right hand.

It is neither right nor wrong. It is a system that works. And systems that work tend to defeat systems that ought to work.