On May 14, 2024, U.S. President Biden announced additional tariffs on Chinese products in the Rose Garden of the White House in Washington, D.C., to promote U.S. investment and employment.
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DETROIT – President Biden’s plan to quadruple tariffs on Chinese-made electric vehicles is unlikely to stop the threat of more Chinese cars and trucks on U.S. roads.
The 100% tariffs announced on Tuesday are higher than the current import tax of about 25% and cover electric vehicles imported from China, but could still leave room to drive down domestic prices for typically cheap Chinese models and provide opportunities for Chinese automakers to compete elsewhere. Nationally produced imported cars leave loopholes.It also does nothing to solve the current or future problems with gas-powered vehicles being imported into the United States from communist countries
Auto and trade experts say higher tariffs are a near-term protectionist move that could delay but not prevent Chinese automakers from bringing electric vehicles to the United States.
“They’re going to get here. It’s inevitable. It’s just a matter of time,” said Dan Hearsch, co-head of the Americas automotive and industrial practice at consulting firm AlixPartners. “Western automakers, Western suppliers really have to step up their game. , and be ready to take on this challenge or work with them one or the other.”
The electric vehicle tariffs, including other increases on battery materials, are part of new tariffs on $18 billion worth of Chinese imports.
Chinese contest
For decades, Chinese auto companies have said they would start selling cars in the United States under their own brands, but none have succeeded.
The quality and manufacturing standards of Chinese automakers’ vehicles have improved significantly in recent years as the Chinese government subsidizes their operations to increase domestic production.The increase in domestic automobile manufacturers has driven The market share of global car manufacturers in the country is deteriorating rapidly, e.g. General Motors.
Their market share in the U.S. is also threatened by global players. The so-called Big Three of American automobiles—General Motors, Ford and Chrysler, now represented by star — Their U.S. market share dropped from 75% in 1984 to about 40% in 2023, according to industry data.
General Motors and other companies are finding it difficult to compete with China’s cheap and mainstream vehicles, including electric vehicles. For example, a small electric car called the Seagull produced by Warren Buffett-backed BYD, which starts at about $10,000, has reportedly generated profits for the increasingly influential Chinese automaker.
Although Seagull is not yet sold in the United States, BYD is expanding its automotive operations globally, and some believe it is only a matter of time before more Chinese-made vehicles arrive in the United States.
Even with new 100% tariffs, pricing will likely be in line with or better than many electric vehicles currently sold in the U.S.
Morgan Stanley analyst Tim Hsiao said: “Ultimately, we believe protectionism from the West may remain a short-term threat as Chinese EV/parts makers seek rapid global expansion, but we believe that in the long term Look, this is unlikely to stop the growth of electric vehicles in China.
Although some automakers currently import gas-powered vehicles from China to the United States, the numbers are small.Wall Street analysts cited a report from the China Association of Automobile Manufacturers that said fewer than 75,000 vehicles were imported from China into the United States last year.
Cars made in China and now sold in the United States include General Motors’ gas-powered Buick Envision, Ford’s Lincoln Nautilus and two all-electric vehicles from Geely’s Volvo and its spin-off electric vehicle startup Pole Star.
Polestar has fewer models and is particularly dependent on imports from China. In a statement, the company said it was “currently evaluating the tariff increases announced by the Biden administration” and said it believed “free trade is critical to accelerating the transition to more sustainable mobility by increasing the adoption of electric vehicles.” important.
green target
Biden’s focus on Chinese-made electric vehicles — and excluding gasoline-powered vehicles from higher taxes — is in line with his administration’s clean energy agenda, which emphasizes mass production and adoption of electric vehicles and strengthening U.S. charging infrastructure.
“Electric vehicles are a focus area for our tariffs because we’ve made hundreds of billions of dollars of public investments in this area. We’re making these investments to strengthen the resiliency of our clean technology supply chains. So that’s our focus here. ,” a senior administration official told reporters this week.
U.S. officials may be taking warning signs from Europe, where Chinese automakers are rapidly rolling out fuel-efficient electric vehicles and undermining the competitiveness of domestic automakers.
The EU said in October 2023 that Chinese companies accounted for 8% of all-electric vehicle sales in Europe as of September and that their share could increase to 15% by 2025. About 20% lower in the European market.
Zhang Ke, vice president of ESG research at ING Group, said the Biden administration’s new electric vehicle tariffs, if successful in blocking Chinese exports, could have a knock-on effect on other countries, including Europe.
She said similar tariffs elsewhere could force Chinese companies to set up local production operations faster or form joint ventures with other companies to reduce export costs.
“From China’s perspective, if there can be supply or other forms of partnerships, they can still find a way to enter the U.S. market,” Zhang said.
The moves are reminiscent of how Japanese automakers such as Toyota Motor Corp and Nissan Motor Co and South Korean Hyundai Motors such as Kia Motors have entered the U.S. market in recent decades.
– CNBC’s Rebecca Picciotto and Michael Bloom contributed to this report.
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