Tariffs likely to deter sales push in crucial US market
White House places 100% duty on vehicles as part of levies to hit US$18b of Chinese imports
Punitive tariffs on Chinese-made electric vehicles (EVs) by the White House are likely to deter BYD, Zhejiang Leapmotor and other mainland peers from pushing their sales in the United States, even as the pace of electrification is accelerating in the global car industry, analysts have said.
Some mainland makers would turn cautious on their overseas expansion drive after the US slapped a 100 per cent duty on imported Chinese batterypowered cars, they added.
These carmakers are already bracing themselves for another blow in Europe after the European Commission started an investigation last year into Beijing’s subsidies for the sector.
“The US market is of vital importance to the global automotive industry,” said David Zhang, director of the WDEF Digital Automotive International Cooperation Research Centre in Shanghai.
“Chinese EV assemblers will face big hurdles in building brand awareness around the world without strong sales in the US.”
The White House yesterday announced a quadrupling of tariffs on Chinese-made EVs from 25 per cent, in an array of measures to hit US$18 billion of Chinese imports that it said would protect US companies from unfair subsidies doled out by Beijing to its companies. Lithium batteries, steel, critical minerals, solar cells and semiconductor chips were also hit with higher levies.
US President Joe Biden was also expected to maintain tariffs on more than US$300 billion worth of Chinese goods that were imposed during Donald Trump’s presidency, taxes that sparked a costly trade war between the world’s two biggest economies.
China had earlier responded to the imminent increases by saying the US was politicising trade issues while abusing the so-called review process of tariffs.
China would take all necessary measures to defend its rights and interests, said Lin Jian, a spokesman for the foreign ministry.
The tariff rises also came amid mounting worries in Washington about the risks posed by smart vehicles built by mainland manufacturers. Commerce Secretary Gina Raimondo said in January the vehicles would collect a “huge amount of information about a driver” in the US.
While China is the runaway leader in the global EV sector, where sales of pure electric and plug-in hybrid cars account for 60 per cent of the world total, almost none of the vehicles made in China are sold in the US.
Most mainland-built models fall into the category of intelligent cars, as they are fitted with autonomous driving systems. Intelligence is also measured by the cars’ digital bells and whistles, manifested in such built-in features as voice-activated controls, facial recognition, over-theair software upgrades and phone-linked components.
“When a carmaker moves to tap markets outside, it also develops and builds specific models to cater to local customers and comply with foreign laws and regulations,” said Chen Jinzhu, CEO of consultancy Shanghai Mingliang Auto Service.
“Taking the long view, trade barriers erected by the US will affect confidence among carmakers in their go-global strategy, even though America is not their key target market yet.”
EV assemblers will face big hurdles … without strong sales in the US DAVID ZHANG, RESEARCHER
State subsidies for Chinese makers could also result in higher tariffs on their shipments into Europe following an investigation by the European Commission last September. These firms pay the standard rate of 10 per cent on their exports to the single market on the continent.
In a teardown report last month on BYD’s pure-electric Seal model, Swiss investment bank UBS found the sedan had an advantage over Tesla’s Model 3 assembled in China with an estimated 15 per cent lower production cost.
Last year, China surpassed Japan as the world’s largest vehicle exporter for the first time when its overseas shipments jumped by 22 per cent to 4.91 million units. Deliveries of EVs alone surged by 78 per cent to 1.2 million units from a year earlier.
Chinese-made cars were benefiting from a faster pace of electrification at home and were likely to control 33 per cent of the global market by 2030, up from 17 per cent in 2022, analysts at UBS said in a report in September.