U.S. President Joe Biden announces increased tariffs on Chinese products to boost American investment and jobs in the Rose Garden of the White House on May 14, 2024 in Washington, DC.
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DETROIT (AP) — President Joe Biden’s plan to quadruple tariffs on electric vehicles made in China is unlikely to avert the threat of more Chinese cars entering the U.S. auto sales market
The 100 percent tariff announced Tuesday, up from the current import tax of about 25 percent, covers electric vehicles imported from China but could still leave room for the often cheap Chinese models to undercut domestic prices and leaves loopholes for imports Chinese automakers in other countries such as neighboring Mexico. Nor does it affect current or future gas-powered vehicles imported into the United States from the communist country
Automotive and trade experts say the increased tariffs are a short-term act of protectionism that may delay but not stop Chinese automakers from coming to the U.S. with electric vehicles.
“They will be 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 and Western suppliers should really make an effort and prepare to take it or play it. It’s one or the other.”
The electric vehicle tariffs, including other hikes on battery materials, were among new tariffs on $18 billion worth of Chinese imports.
Chinese competition
For decades, Chinese auto companies have said they would begin selling vehicles in the U.S. under their own brands, but none have succeeded.
The quality of vehicles from Chinese automakers has improved significantly in recent years as Beijing has helped grow domestic production by subsidizing their operations. The increase in domestic automobile manufacturers has led to a rapid decline in the market share of global automobile manufacturers in the country General Motors.
Global players have penetrated the US market more heavily in recent years. The so-called Big Three US automobile manufacturers – GM, Ford engine and Chrysler, now owned by Stellar — have seen their market share in the country decline from 75% in 1984 to about 40% in 2023, according to industry data.
GM and others are finding it difficult to compete with affordable and mainstream Chinese vehicles, including electric vehicles. For example, a small electric vehicle from Warren Buffett-backed BYD called Seagull starts at about $10,000 and is expected to make a profit for the increasingly influential Chinese automaker.
Although the Seagull isn’t sold on U.S. soil yet, BYD is expanding its vehicles worldwide, and some believe it’s only a matter of time before more Chinese-made vehicles arrive in the U.S
Even with the new 100 percent tariff, the price would likely be equal to or better than many electric vehicles currently sold in the United States
“Ultimately, we believe Western protectionism may remain a short-term overhang for Chinese EV/parts manufacturers seeking rapid global expansion, but we think it is unlikely to halt China’s EV push in the long term,” says Morgan Stanley analyst Tim Hsiao said in an investor note this week.
Read more CNBC news on Chinese electric vehicles
Although some automakers are currently importing gasoline-powered vehicles from China to the U.S., the numbers are small. Wall Street analysts, citing the China Association of Automobile Manufacturers, report that fewer than 75,000 vehicles were imported into the United States last year.
Vehicles made in China and currently sold in the U.S. include GM’s gasoline-powered Buick Envision, Ford’s Lincoln Nautilus, and two all-electric vehicles from Geely-owned Volvo and its spinoff EV startup Polaris.
With a small range of vehicles, Polestar relies primarily on its Chinese imports. The company said in a statement that it is “currently reviewing the Biden administration’s announcement of tariff increases” and believes that “free trade is essential to accelerate the transition to more sustainable mobility through increased adoption of electric vehicles.”
Green goals
Biden’s focus on electric vehicles made in China — and excluding gas-powered vehicles from the higher taxes — fits with the White House’s clean energy agenda, which emphasizes electric vehicle production and adoption as well as improved U.S. charging infrastructure.
“When we impose tariffs, our focus is on electric vehicles, where we have hundreds of billions of dollars of public investment. We made these investments to strengthen the resilience of our clean technology supply chains. And that is our concern.” “Focus here,” a senior administration official told reporters this week.
It’s possible that U.S. officials are picking up on a warning signal from Europe, where Chinese automakers have quickly flooded markets with fuel-efficient electric vehicles and undercut domestic automakers.
According to the European Union in October 2023, Chinese companies accounted for 8% of European sales of fully electric vehicles in September and could increase their share to 15% by 2025. The EU expects Chinese electric vehicles to undercut prices of local models by around 20%.
According to Coco Zhang, vice president of ESG research at ING Group, the Biden administration’s new tariffs on electric vehicles could impact other countries, including in Europe, if they manage to curb Chinese exports.
She said similar tariffs elsewhere could force Chinese companies to more quickly set up local manufacturing operations or joint ventures with other companies to reduce export costs.
“From China’s perspective, they can still find their way into the U.S. market if there are supply or other partnerships,” Zhang said.
Such moves would be reminiscent of how Japanese automakers such as Toyota Motor and Nissan Motor and South Korea’s Hyundai Motor, including 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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2024-05-15 19:46:13
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