[Introduction: The U.S. trade war with China in the Trump era has reached a climax again at the end of Biden's first term. Tariffs have been imposed on a large number of Chinese products, including electric vehicles. Under the high tariffs, where will China's EV exports go? According to data released by CleanTechnica, a global consulting agency, among the 20 best-selling electric vehicles in the world in the first quarter of this year, in addition to Tesla Model Y, Tesla Model 3, Volkswagen ID.4, and Volkswagen ID.3, the other 16 are Chinese brand models. 】
Written by Zhang Chi and edited by He Zi
Before the European Union has yet to impose steep tariffs on Chinese electric vehicles, the United States has taken the lead.
On May 14, the United States released the results of the four-year review of the additional Section 301 tariffs imposed on China. Among them, the most notable is that it has further increased the relevant tariffs to 100% on top of the original 25% tariff imposed on Chinese electric vehicles; Tariffs on lithium-ion batteries and their components for electric vehicles will jump to 25% from 7.5% this year. In addition, products including photovoltaic cells, critical minerals, semiconductors, steel and aluminum, port cranes, and personal protective equipment are all subject to the US tariffs.
Is it difficult to stop China's electric vehicles with a 25% tariff?
The U.S. crackdown on Chinese automakers has been underway for a long time. In 2018, during the Trump-era trade war with China, tariffs on Chinese exports to the United States were raised to 25%. At that time, in the field of fuel vehicles, although we were quite competitive in terms of cost, it was already difficult to cope with the 25% tariff. However, at that time, it was mainly foreign car companies such as SAIC-GM and Volvo. They use their production capacity in China to export gasoline-powered vehicles to the U.S. market. At that time, Volvo had not yet been put into production at the U.S. plant, and the Buick Envision exported by SAIC-GM was a relatively unpopular model in the U.S. market. If it is produced in the United States, it will not be a good deal for General Motors. But with the arrival of the 25% tariff, Chinese car exports to the United States have not resumed.
In the eyes of American politicians and business people, even a 25% tariff on China's electric vehicles will not offset China's huge advantage in the cost of electric vehicles. This is not only in the United States, but also in Europe. Therefore, recently, there have been rumors that the EU has proposed to impose a 50% tariff on electric vehicles from China.
According to data released by CleanTechnica, a global consulting agency, among the 20 best-selling electric vehicles in the world in the first quarter of this year, in addition to Tesla Model Y, Tesla Model 3, Volkswagen ID.4, and Volkswagen ID.3, the other 16 are Chinese brand models. In the pure electric vehicle market, the leading edge of China's automotive industry is very large. In the European market, where Chinese car companies are focusing on deep cultivation, even if Chinese electric vehicles are sold 50% or more more more expensive than those in China, they can still gain greater competitiveness in the European market with high cost performance. Therefore, even if China exported only a handful of electric vehicles to the United States last year, the US government wants to prevent problems and keep Chinese electric vehicles out of the country.
The United States intends to suppress the entire Chinese new energy vehicle industry chain
The U.S. restrictions on China's new energy vehicle industry are not only limited to the vehicle level, but also exclude China's battery industry, which also has huge advantages. This time, the U.S. government will jump tariffs on lithium-ion batteries and their components to 25% from 7.5% this year, which will further block the survival space of Chinese batteries in the American market. In the field of global on-board power batteries for electric vehicles, especially in the field of lithium iron phosphate batteries with more obvious cost advantages, whether in terms of technology or scale, the Japanese and South Korean battery companies that follow China will not be able to catch up in the short term. Not to mention CATL and BYD, the group combat advantage of the entire Chinese battery company is very obvious.
Earlier, the Inflation Reduction Act (IRA) introduced during the Biden administration stipulated that electric vehicles using battery components made or assembled in China would not receive up to $7,500 in subsidies from the U.S. government starting in 2024. From 2025, this restriction will also be extended to critical minerals such as lithium carbonate produced in China. This directly led to the emergency switch of CATL's batteries for electric vehicles produced in the United States, and for a time, it was difficult for CATL's battery factories to license Ford's technology.
What's next for Chinese automakers?
There are two main ways to break down tariff barriers, both in the United States and in Europe:
1. Build a factory in the local area
Building a factory in the region is the best way to effectively circumvent the restrictions of tariff barriers. Therefore, since the beginning of this year, BYD, SAIC, Chery, etc. are actively deploying factories in Europe. However, building a factory in Europe not only needs to face high labor costs and more complex employee management, but also the migration of the domestic new energy vehicle industry chain.
However, compared with Europe, which is more welcoming to Chinese car companies to build factories in Mexico, the United States does not support Chinese car companies to build factories in the United States, and even targets Chinese car companies that want to build factories in Mexico. The comprehensive containment of China's electric vehicles and the entire high-tech manufacturing industry in China has become a basic action of the United States.
2. Technology Licensing
Compared with building factories, technology licensing will become a new way for Chinese car companies to go global in the future. Recently, Leapmotor International, a joint venture between Leapmotor and Stellantis, has landed. The T03 and C01 models will be put into production at Stellantis' plant in Poland and then sold through Stellantis' network in Europe and around the world. By 2030, Leapmotor International will reach an annual sales volume of 500,000 units. With the help of Geely's system capabilities, Volvo has sold the EX30 designed by Geely and manufactured by Geely in Europe, which not only makes a lot of money, but also beats Volkswagen and Tesla to win the championship of electric vehicle sales in many European countries.
In the domestic market, related technology licensing has become commonplace. Volkswagen has invested in Xpeng and Zhiji to export technology to Audi, and Toyota and BYD have cooperated to introduce BYD's e-platform 3.0 technology. Not long ago, it was even rumored that Toyota will also introduce BYD's DM-i super hybrid technology.
Comments
In the global auto market, it is actually difficult to protect the domestic industry through a trade war alone. Because outside of the United States, there are other vast automotive markets. In Southeast Asia, South America, the Middle East, Australia and New Zealand and other markets, it is still difficult for European and American car companies to bypass the straight ball duel with Chinese car companies. Excluding Chinese automakers from the U.S. market will only make the U.S. market less competitive and slowly make the U.S. auto industry less competitive on the global stage.
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