The New York Times reported on May 15, 2024, by Neal E. Boudette
The Biden administration's new tariffs on Chinese EVs will not have a huge direct impact on U.S. consumers or the auto market, as very few EVs are sold in the U.S.
However, the decision reflects deep concerns in the U.S. auto industry, which is increasingly concerned about China's ability to produce cheap electric vehicles. U.S. automakers welcomed the Biden administration's decision on Tuesday to impose 100 percent tariffs on electric vehicles from China, saying the cars would undermine billions of dollars in U.S. investment in electric vehicles and battery factories.
Senator Gary Peters, Democrat of Michigan, said in a statement: "Today's announcement is a necessary step to combat the Chinese government's unfair trade practices, which jeopardize the future of our auto industry. "This will help level the playing field, keep our automotive industry competitive, and support domestic well-paying union jobs," Senator Gary Peters said in a statement.
On Tuesday, President Biden announced a series of new and increased tariffs on certain Chinese-made goods, including a 25 percent tariff on steel and aluminum and a 50 percent tariff on semiconductors and solar panels. Tariffs on Chinese-made electric vehicles have quadrupled from 25 percent. Tariffs on lithium-ion batteries for electric vehicles in China will increase from 7.5% to 25%.
The U.S. imports only a handful of electric and gasoline vehicles from China. One of them is the Polestar2, an electric car produced in China by a Swedish automaker, in which the Chinese company Zhejiang Geely has a controlling stake. Polestar said in a statement that it was assessing the impact of Mr Biden's statement.
"We believe that free trade is essential to accelerate the transition to more sustainable mobility by increasing the adoption of electric vehicles," the company said.
In the first quarter of this year, Polestar sold only 2,200 cars in the United States. Later this year, though, Polestar plans to start production of the new Polestar3 at a plant in South Carolina, which is operated by Geely's Volvo Car Company.
Volvo sells the S90 Recharge, a Chinese-made plug-in hybrid sedan, in the U.S. and plans to start importing a new small sport utility vehicle EX30 from China to the U.S. this year. The car is expected to start at $35,000 and is one of the most affordable battery-powered models in the United States. The model has quickly become Volvo's best-selling model in Europe.
Volvo said on Tuesday that it was assessing the potential impact of Mr. Biden's new tariffs on its plans.
Among the internal combustion models produced in China and sold in the U.S. are the Buick Envision S.U.V. produced by General Motors and the Lincoln Nautilus produced by Ford Motor Company. They are not affected by customs duties.
Tesla, General Motors, Ford, Volkswagen, Hyundai and several other automakers have invested tens of billions of dollars in battery and electric vehicle factories in the United States. But with the exception of Tesla, automakers in the United States, Europe and Japan lag behind Chinese companies in terms of scale, raw material production and key technologies.
Chinese manufacturer Contemporary Embryl Technology Co., Ltd. (CATL), the world's largest producer of batteries for electric vehicles, said last month that it had developed a battery that could fully charge the car in 10 minutes and get the car about 370 miles on a full charge — a major leap from the batteries used by prominent Western and Asian automakers, including Tesla.
China's leading position in electric vehicles is seen as central to the future of the auto industry, raising concerns that Chinese cars could enter the U.S. market at prices that General Motors, Ford and other traditional automakers can't compete with.
BYD, a leading and fast-growing Chinese car and battery company, is already selling a compact electric car, the Seagull, in China for less than $15,000. On Tuesday, the company said it would begin selling a plug-in hybrid pickup truck in Mexico, but it added that it does not plan to sell the car in the United States at this time.
Chinese automakers such as BYD, Geely and SAIC have been increasing their car exports to countries in Europe, Latin America and Asia. The European Commission, the EU's executive body, is investigating China's state subsidies to electric vehicle manufacturers.
Some representatives of the U.S. auto industry say the Chinese government's support for automakers has made Chinese factories capable of producing far more cars than they can sell in the United States.
John Bozzella, president of the Automotive Innovation Alliance, a leading lobbying arm for U.S. automakers, said: "They face a serious problem of overcapacity for electric vehicles".
"They have built too many electric cars for the domestic market – too many heavily subsidized electric vehicles – and they have no choice but to look abroad and sell them cheaply," Mr. Bozera added. If heavily subsidized Chinese electric vehicles can be sold to American consumers at below-market prices, the competitiveness of the U.S. auto industry will be undermined."
Chinese officials have denied that China is overproducing electric vehicles, solar panels and other products targeted by the Biden administration. Liu Pengyu, a spokesman for the Chinese embassy in Washington, said on Tuesday: "We hope that the United States can take a positive view of China's development and stop promoting trade protectionism under the pretext of overcapacity."
Automakers have already tasted how price competition can disrupt their EV plans. Over the past year, Tesla has lowered the prices of its models several times, with some models reducing their costs by more than 20% in total. These price cuts, combined with a slowdown in EV sales growth, have made it extremely difficult for G.M. and Ford to make money on battery-powered models.
In the first three months of this year, Ford's electric vehicle division lost $1.3 billion, and that's not counting some expenses. Both Ford and G.M. have slowed the production of electric vehicles and delayed the launch of new models. While G.M. is losing money on electric vehicles, the company said it expects those cars to start making a profit later this year.
The Biden administration has sought to support and encourage the production of batteries and electric vehicles in the U.S. to combat climate change and encourage more domestic manufacturing.
China is not the only obstacle. Americans' enthusiasm for electric vehicles has waned over the past year, largely due to the relatively high price of such cars. Some buyers are also reluctant to buy because they are not sure if there are enough places to charge these cars easily and quickly.
According to the Kelley Blue Book, in the first quarter of this year, a total of 269,000 electric vehicles were sold in the U.S. market. Compared to the same period last year, the increase was only 2.6%. Combined sales of cars and light trucks increased by more than 5 percent to 3.8 million units.
Jessica Caldwell, executive director of market research firm Edmonds Insights, said: "In many ways, buying an electric car requires lifestyle changes. A lot of people just say, 'I don't want the hassle of electric cars.'"