Chinese EVs

Biden set to levy 100% tariffs on Chinese EVs this week

biden administration, Cars, Chinese EVs, tariffs / Ryan Harris / May 13, 2024

The Chinese government does not have US consumer interests at heart —

Both the US and EU are deeply concerned about heavily subsidized Chinese OEMs.

Jonathan M. Gitlin – May 13, 2024 3: 45 pm UTC

The photo is filled with row after row of new SUVs, all painted white or grey. — Enlarge / New energy vehicles are being loaded into containers for export at Taicang Port and Taicang International Terminal in Suzhou, Jiangsu Province, China, on April 26, 2024.

Photo by Costfoto/NurPhoto via Getty Images

President Joe Biden is expected to levy new 100 percent tariffs targeted at specific Chinese industries, including electric vehicles, on Tuesday. The announcement follows growing calls from automakers, unions, and bipartisan efforts in Congress to address the problem of China unfairly subsidizing its own industries to undermine foreign competitors.

Why are Chinese EVs so cheap?

The Chinese government has been giving its green industries heavy direct subsidies for some time now, far in excess of those handed out by US or European governments. For EV makers like BYD, this has meant billions of dollars a year, in addition to the consumer-facing tax benefit for car buyers, similar to how EV sales are incentivized in the US.

Brands like BYD have concentrated on making their cars cheaper to build—only using one windshield wiper instead of two, for example—but also through vertical integration. Other than Tesla, automakers in the US, Europe, Japan, and Korea instead rely heavily on multiple tiers of suppliers, most of whom supply parts to more than one automaker.

Chinese EV makers have also embraced technology to a degree still not matched by other brands, with screens stretching across entire dashboards and online connected services (plus the associated government tracking) that are anathema to many Ars readers. (Indeed, in February, the US Department of Commerce opened an investigation into whether imported Chinese-connected cars pose a national security threat. The Chinese government has repeatedly restricted the places that Tesla drivers are allowed take their cars, as it considers them a threat to its own security.)

That has allowed Chinese automakers to sell their products in foreign markets at prices no one else can hope to compete with, undermining local industries in the process. This has been most relevant in Europe, where Chinese automakers like BYD and MG have already set up shop. Last year, 1 in 5 EVs sold in Europe were made in China; this year, it’s expected this number will rise to 1 in 4.

What’s everyone doing about it?

Last year, the European Union began an investigation into anticompetitive behavior by Chinese OEMs, and stronger EU tariffs on Chinese EVs are expected to be levied in the next few weeks.

Chinese car imports to the US are already subject to an additional 25 percent import tariff on top of the 2.5 percent tariff that applies to any car imported to the US. And Chinese brands have yet to enter the US market. If enacted this week, the new 102.5 percent tariffs would apply to Polestar and Lotus, both of which currently build their US-market EVs in China. But that doesn’t mean the industry isn’t terrified.

“If there are no trade barriers established, they will pretty much demolish most other car companies in the world,” said Tesla CEO Elon Musk in January.

“If you cannot compete fair and square with the Chinese around the world, then 20 percent to 30 percent of your revenue is at risk,” said Ford CEO Jim Farley in February.

It probably goes without saying that the United Auto Workers also thinks protecting the US auto industry is worthwhile. “The transition to cleaner technologies cannot be used to intensify the global race to the bottom through offshoring and low wages. We need to see movement by the administration to protect these jobs. The nascent EV industry needs tariff protections—otherwise we are going to be awash in imports. The stakes of the transition are high for American workers,” the union said in a statement in March.

US politicians have already passed laws to counter the threat of China dumping EVs here. The Inflation Reduction Act of 2022 revised how the IRS clean vehicle tax credit works; the consumer subsidy is now only eligible on vehicles assembled in North America. Each year, an increasing amount of the battery pack’s content and value must also have originated in the US or a country with which we have a free trade agreement in order to be eligible, and EVs with Chinese batteries are explicitly not eligible.

This year, senators on both sides of the aisle—most recently Sherrod Brown (D–Ohio)—have called for a ban on Chinese EV imports. And pressure from the US Trade Representative has seen the Mexican government promise not to offer incentives to Chinese EV makers looking to establish a beachhead inside the United States-Mexico-Canada Free Trade Agreement.

Biden set to levy 100% tariffs on Chinese EVs this week Read More »

“Ban Chinese electric vehicles now,” demands US senator

BYD in the crosshairs —

China’s EV industry benefits from billions of dollars in government subsidies.

Jonathan M. Gitlin – Apr 12, 2024 3: 46 pm UTC

A row of BYD vehicles on a dealer lot in Berlin. — Enlarge / BYD electric cars stand at a BYD dealership on April 05, 2024, in Berlin, Germany. BYD, which stands for Build Your Dreams, is a Chinese manufacturer that went from making solar panels to electric cars. The company is seeking to gain a foothold in the German auto market.

Sean Gallup/Getty Images

Influential US Senator Sherrod Brown (D–Ohio) has called on US President Joe Biden to ban electric vehicles from Chinese brands. Brown calls Chinese EVs “an existential threat” to the US automotive industry and says that allowing imports of cheap EVs from Chinese brands “is inconsistent with a pro-worker industrial policy.”

Brown’s letter to the president is the most recent to sound alarms about the threat of heavily subsidized Chinese EVs moving into established markets. Brands like BYD and MG have been on sale in the European Union for some years now, and last October, the EU launched an anti-subsidy investigation into whether the Chinese government is giving Chinese brands an unfair advantage.

The EU probe won’t wrap until November, but another report published this week found that government subsidies for green technology companies are prevalent in China. BYD, which now sells more EVs than Tesla, has benefited from almost $4 billion (3.7 billion euro) in direct help from the Chinese government in 2022, according to a study by the Kiel Institute.

Last month, the EU even started paying extra attention to imports of Chinese EVs, issuing a threat of retroactive tariffs that could start being imposed this summer.

Chinese EV imports to the EU have increased by 14 percent since the start of its investigation, but they have yet to really begin in the US, where there are a few barriers in their way. Chinese batteries make an EV ineligible for the IRS’s clean vehicle tax credit, for one thing. And Chinese-made vehicles (like the Lincoln Nautilus, Buick Envision, and Polestar 2) are already subject to a 27.5 percent import tax.

An existential threat?

But Chinese EVs are on sale in Mexico already, and that has American automakers worried. Last year, Ford CEO Jim Farley said he saw Chinese automakers “as the main competitors, not GM or Toyota.” And in January, Tesla CEO Elon Musk said he believed that “if there are no trade barriers established, they will pretty much demolish most other car companies in the world.”

BYD, which recently debuted a sub-$10,000 EV called the Seagull, is reportedly looking for a factory in Mexico. That would allow it to build cars for the US market that aren’t subject to the 27.5 percent tax.

But not if Congress gets its way. A few weeks ago, Joshua Hawley (R-Mo.)—using very similar language to Brown—called for a tax increase on Chinese EVs. Hawley wanted to raise the base tariff from 2.5 percent to 100 percent, which would result in Chinese EVs being subject to an overall 125 percent import tax, up from today’s 27.5 percent. Hawley also wanted to apply those rates to Chinese EVs assembled in Mexico.

“A surge in Chinese EV sales would cripple the domestic manufacturing base, including critical inputs from parts suppliers to steel, tires, and glass producers,” wrote Brown, noting also that Chinese EVs could “undermine efforts to reshore semiconductor production.” Brown is similarly down on allowing made-in-Mexico EVs from Chinese brands.

It’s not just the potential damage to the US auto industry that has prompted this letter. Brown wrote that he is concerned about the risk of China having access to data collected by connected cars, “whether it be information about traffic patterns, critical infrastructure, or the lives of Americans,” pointing out that “China does not allow American-made electric vehicles near their official buildings.”

At the end of February, the Commerce Department also warned of the security risk from Chinese-connected cars and revealed it has launched an investigation into the matter.

Brown doesn’t just want a tariff on Chinese EVs, though. “When the goal is to dominate a sector, tariffs are insufficient to stop their attack on American manufacturing,” Brown wrote. “Instead, the Administration should act now to ban Chinese EVs before they destroy the potential for the US EV market. For this reason, no solution should be left off the table, including the use of Section 421 (China Safeguard) of the Trade Act of 1974, or some other authority.”