[LINK] O/t: The Automotive Cold War Is Officially Underway

[Stephen Loosley]

The Automotive Cold War Is Officially Underway

The White House plans to slap 100% tariffs on Chinese-made electric vehicles, according to The Wall Street Journal.

By: Tim Levin May 10, 2024  https://insideevs.com/news/719283/chinese-ev-tariffs-biden-quadruple/


Two things of note in the electric vehicle world happened today around the same time.

First, the Geely Group-owned Chinese EV brand Zeekr debuted on the New York Stock Exchange at a valuation of around $5.2 billion.

Then, around 250 miles south in Washington, D.C., news emerged that the Biden Administration is set to quadruple tariffs on Chinese-made electric cars if they hit American roads.

The timing may be purely coincidental. But after this week, one thing feels clearer than ever: the automotive Cold War between China and the West is fully underway, and EVs specifically are at the center of it all.


The Wall Street Journal got the scoop that the White House plans to announce higher tariffs on Chinese clean-energy imports in the coming days.

Under the reported new policies, tariffs on Chinese EVs are set to quadruple, rising from the current 25% to a whopping 100%, anonymous sources told the outlet.

In theory, that would substantially increase the cost of any Chinese-made EVs on our market, including, potentially, ones sold by known Western and other Asian brands.

It's no secret why the U.S. is attempting to push back on Chinese EVs, to say nothing of other clean energy imports from that country like solar panels.

China has spent years aggressively building up its capacity to manufacture electric cars. It's developed a stranglehold on the supply chains for lithium-ion batteries and the critical minerals they contain. It has lavished state incentives on both EV production and purchasing.

In recent years, the country has emerged as a global EV powerhouse—and, for the first time ever, an automotive exporter on par with leaders like Japan and Germany.

Many still believe that China's cars are cheap and technologically subpar.  But the truth is China has learned to build cars very, very well, as InsideEVs' own Kevin Williams discovered during a recent trip to the Beijing auto show.

China's homegrown electrified vehicles range from the inexpensive—some, like the BYD Seagull, cost less than $10,000 in their home market—to higher-end, luxury-focused offerings like the Yangwang U8, a kind of plug-in hybrid competitor to the Mercedes G-Class that can "float" on water.

>From batteries to software, most are incredibly advanced.

Car companies and policymakers in the U.S. (and Europe) say these cars pose a real threat to our nascent EV market, where many options still remain unaffordable and things like batteries and software are works in progress.

In response, European Union officials have also launched investigations into Chinese imports that could lead to stronger tariffs.

Chinese companies like BYD, the country's largest EV manufacturer, already sell vehicles worldwide across Asia, South America and Europe.

The U.S., the world's second-largest vehicle market after China, is widely seen as Chinese EV makers' next target. BYD and others would likely set up manufacturing in Mexico, and some are already eyeing this.

There are already some Chinese-made EVs available in the U.S. from European or American brands.

Lincoln and Buick both import models to the U.S. that are China-made. Polestar, an electric-only offshoot of Volvo, sells the Polestar 2 sedan. Volvo's upcoming EX30 crossover will be made in China. (Both Volvo and Polestar are owned by Geely, the Chinese auto group that debuted Zeekr on Wall Street today.)

Volvo has touted the EX30's $35,000 starting price as a potential game-changer in the U.S. market. But that price includes the current 25% tariff; would the car get more expensive now, before it goes on sale here? Would the new policy impact Volvo's reported plans to recover tariffs through exports from its U.S. plant?

A Volvo spokesperson declined to comment on the company's pricing strategy to InsideEVs, which is to say that for now, nobody knows. It's still unclear exactly which cars the new tariffs will apply to.


According to The Wall Street Journal, the new tariffs on Chinese goods will also hit solar panels, batteries and critical battery minerals. We'll have to wait and see what the details bear out.

It's also no coincidence this is happening during an election year. Electric cars have emerged as a new battleground in the intensifying right-left culture wars. The looming threat of cheap, appealing vehicles built by a clear adversary has raised alarm across the political spectrum.

Former President Donald Trump established the existing 25% tariff on Chinese cars. As he seeks reelection, he has said on the campaign trail that he would raise that to 100%. He's said, controversially, that if he were to lose, it would amount to a "bloodbath" for the American auto industry.

But the drum-beating hasn't just come from the Republican Party. Biden's Treasury Secretary Janet Yellen recently warned China that the U.S. wouldn't just absorb its excess production of EVs.

"When the global market is flooded by artificially cheap Chinese products, the viability of American and other foreign firms is put into question," Yellen told Chinese officials during a trip to Beijing earlier this year.

The Biden Administration is also working to prop up domestic EV and battery manufacturing. The $7,500 tax credit for EV purchases, for example, only applies to vehicles made in the U.S. without Chinese components. And scores of Inflation Reduction Act incentives are boosting local battery and EV plants in the U.S. and North America, although it will be years before all are running at full steam. In effect, the tariffs may end up buying the U.S. some time, rather than being a permanent solution here.

After all, as Kevin Williams pointed out after going to Beijing: all of these crackdowns aren't guaranteed to yield better cars from Ford, General Motors and the rest.

And so, the automotive Cold War has ramped up. And like the last Cold War, it's just one more proxy battle between the superpowers of the East and West—except this time, the geopolitical adversary is also one of the world's largest economies and a top trading partner. Nothing about this is going to be easy to untangle.

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TOP COMMENTS

Fields Carlisle
May 11, 2024, 5:45 AM

China already does this to US made imported cars. So it’s really just leveling the playing field. I think it should apply to all Chinese made vehicles so companies like GM can’t prosper off of making cars overseas and importing them here at low cost. China would never allow the US automakers to dump cheap cars on their market. It’s also impossible for US companies to compete on price when China subsidizes their auto market and the cost of raw materials and their labor costs are so much lower.

Solarman2
May 11, 2024, 12:59 PM

China already does this to US made imported cars. So it’s really just leveling the playing field.
I'm not seeing this as "leveling the playing field", how does one level the playing field to a product at least by some accounts is better and cheaper?

China would never allow the US automakers to dump cheap cars on their market.
I submit TESLA Shanghai vs BYD and CNAS back in 2022-2023. The price decreases TESLA launched, made some new friends who were purchasing and enemies out of others that purchased a particular TESLA model just before the price decreases. The BEV used car valuation is still behind a used ICE vehicle valuation. Great for those who are looking at buying a used one or two year old BEV, bad for those earlier adopters, good for used BEV shoppers.

ModernMarvelFan
May 11, 2024, 8:01 AM

That is not true at all. Chinese import tariff isn't 100%. It is between 25% to 38% depending on the engine displacement sizes. China doesn't prevent US companies from building EVs in the US. But US is currently against Chinese EV makers from investing in the US to build factories. CATL has faced resistance with its joint venture with Ford.

Tesla is also having the same incentives as rest of Chinese EV makers and it is also facing stiff competition.

Competition is good for consumers. This geopolitical play is nothing but vote buying in an election year which will hurt consumer choice in the long term.

timlevin
May 11, 2024, 4:30 AM

Excellent username.

Yeah, there's definitely that element of it. I guess that the US OEMS though still have plenty of incentive to compete in China, so there's still the pressure of competition in that sense. Domestically, it does reduce competition and maybe innovation, but the whole situation is tricky.

Username Taycan
May 11, 2024, 5:45 AM

Thanks!

You'd have thought they would have had plenty of incentive to compete in Europe, but GM doesn't even try, Ford's sales are cratering (and their use of 1.2 million units of VW's MEB hardly screams out we are here to stay) and Chrysler was so successful it was taken over by Europeans.

If they can only compete in the US behind protectionist tariffs then ultimately they can only compete in the US, and manufacturers who have a world market to fund and amortise their offerings across will eek out bigger and bigger advantages.

The more you are dependent on lobbying to survive rather than competence the less you focus on becoming a better more resilient company with competitive products. It's an expressway to weakness and failure and it's enabled by the political mindset of 'Too American to fail'.

JohnW2
May 11, 2024, 5:34 AM

I think this is admission that US car brand sales are going to collapse in China. Otherwise they would be worried about relation, and reduced public acceptance.