On May 14, 2024, in the Rose Garden of the White House in Washington, DC, US President Joe Biden announced an increase in tariffs on Chinese products with the aim of promoting investment and employment in the US.
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Automotive and trade experts say the tariff hikes are a short-term protectionist move that could slow, but not prevent, Chinese automakers from bringing electric vehicles to the United States.
“They’re going to be here. It’s inevitable. It’s just a matter of time,” said Dan Hirsch, Americas co-leader of the automotive and industrial practice at consulting firm AlixPartners. “Western automakers, Western suppliers should really step up and get ready to either work on this or work with them. It’s one or the other.”
The EV tariffs, which include other increases on battery materials, are part of new tariffs on $18 billion worth of Chinese imports.
Chinese car companies have said for decades that they would start selling cars in the United States under their own brands, but nothing has been successful.
The quality of Chinese automakers’ vehicles has improved significantly in recent years as the Chinese government has supported business subsidies to expand domestic production. The increase in domestic automakers has led to a rapid decline in the domestic market share of global automakers such as General Motors.
In recent years, global companies have increasingly expanded into the U.S. market. Industry data shows that the so-called Big Three U.S. automakers – GM, Ford Motor Co., and Chrysler, now owned by Stellantis – expect their market share in the country to decline from 75% in 1984 to about 40% in 2023. I have witnessed it with my own eyes.
GM and others are finding it difficult to compete with low-cost cars, including EVs, and mainstream Chinese cars. For example, Warren Buffett-backed BYD’s small EV, the Seagull, reportedly costs about $10,000, benefiting China’s increasingly influential automakers.
The Seagull isn’t sold stateside yet, but BYD is expanding its fleet globally, and some think it’s only a matter of time before more Chinese-made vehicles arrive in the United States.
Even with the new 100% tariffs, the price would likely be comparable to or better than many EVs currently sold in the United States.
“Ultimately, Western protectionism may continue to have a short-term impact on Chinese EV and parts manufacturers as they seek to rapidly expand globally,” said Morgan Stanley analyst Tim Hsiao. “However, in the long term, we think it is unlikely that China will stop promoting EVs.” said in a note to investors this week.
Currently, some automakers import gasoline-powered vehicles from China to the United States, but the numbers are small. Wall Street analysts, citing the China Automobile Manufacturers Association, reported that fewer than 75,000 vehicles were imported into the United States last year.
Cars made in China and currently sold in the U.S. include GM’s gas-powered Buick Envision, Ford’s Lincoln Nautilus, and all-electric vehicles from Geely’s Volvo and its spinoff EV startup Polestar. Includes 2 cars.
Polestar has a small lineup of vehicles and is particularly dependent on imports from China. The company said in a statement that it is “currently evaluating the Biden administration’s announcement of increased tariffs,” and believes “free trade is essential to accelerating the transition to more sustainable mobility through increased adoption of EVs.” Stated.
Biden’s focus on Chinese-made EVs and excluding gasoline-powered vehicles from higher taxes is consistent with the White House’s clean energy policy, which has focused on increasing the production and proliferation of electric vehicles and strengthening America’s charging infrastructure.
“EVs are where we are focused in terms of setting tariffs because they are where we have made hundreds of billions of dollars of public investment. We’ve made those investments to build resilience in the chain. And that’s our goal: ‘Focus here,”’ a senior administration official told reporters this week.
U.S. authorities may be receiving warning signs from Europe, where Chinese automakers are rapidly bringing fuel-efficient EVs to market, putting pressure on domestic automakers.
The European Union (EU) announced in October 2023 that as of September, Chinese companies accounted for 8% of all-electric vehicle sales in Europe, which could rise to 15% by 2025. It was announced that there is. The EU believes that Chinese EVs are about 20% cheaper than local models. %.
If the Biden administration’s new EV tariffs are successful in blocking exports from China, they could have a ripple effect in other countries, including Europe, said Coco Chan, vice president of ESG research at ING Group.
He said similar tariffs in other regions could force Chinese companies to move more quickly into local production operations and joint ventures with other companies to lower export costs. He said there is.
“From a Chinese perspective, if supply and other types of partnerships are possible, we could find a way to enter the U.S. market,” Zhang said.
The move would be reminiscent of how Japanese automakers such as Toyota and Nissan, as well as South Korea’s Hyundai, including Kia, have entered the U.S. market in recent decades.
– CNBC’s Rebecca Picciotto and Michael Bloom contributed to this report.
