Talk about a brave move—President Biden’s attack on the Chinese electric vehicle markets is nothing but a load of hot air; real Alice Through the Looking Glass material. Putting tariffs on something that is not there will have no impact whatsoever.
Chinese export data shows that few, if any, electric vehicles have been exported to the US. Companies like BYD, Geely, and Nio are increasingly targeting other markets.
BYD is now China’s biggest car maker, whether conventional or NEVs (new energy vehicles). Since 2021, it has ceased production of conventionally powered cars and commercial vehicles, shifting to electrified products like EVs and PHEVs (Plug-ins). It has expanded its foreign activity, selling its cars and commercial vehicles to 83 countries, but it does not sell cars in the US, only batteries, buses, and other commercial vehicles.
These vehicles are not advertised for sale in America, unlike the buses. There are much bigger markets to tackle—Europe, ASEAN, India, Africa, Central and South America, and the Middle East are all available. BYD doesn’t need to sell cars in the US, but it has the option if it chooses.
On the same day Biden announced the new tariffs, BYD launched the Shark, a midsize hybrid-electric pickup truck, in Mexico. In February, BYD announced plans to establish a factory in Mexico.
A Mexico-made EV with sufficient North America-sourced parts could qualify for tariff-free entry into the US market under the 2020 United States-Mexico-Canada Agreement, or USMCA.
The Shark launch made US analysts and commentators realize that Chinese EV makers could easily build vehicles south of the border using mostly American-made components and ship the finished products into America and Canada.
The tariffs will also apply to EVs made by companies like VW, BMW, etc., in China if they are exported to the US. Since these big foreign companies in China are also major foreign carmakers in the US, this sets up an interesting tension with the Biden administration.
The lack of actual shipments makes Biden's tariffs on Chinese EVs appear to be nothing more than an attempt to politically outmaneuver Donald Trump.
The tariff on Chinese EVs will increase from 25% to 100%, but at the moment, it’s equivalent to putting tariffs on air. Even though the Chinese government is naturally upset and warning of retaliation, it knows that the country’s most important renewable-linked business will not be impacted.
Exports of cars, especially EVs, are the only growth export industry left for China. Many conventionally powered vehicles are being exported to Russia by Chinese companies, not their joint ventures with US, Japanese, or European carmakers like VW or BMW or Toyota.
However, the EU's investigation of subsidies for Chinese EVs is far more dangerous, but the industry has support from major German carmakers like VW, BMW, and Mercedes, which strongly influence EU car policy. Massive tariffs or other penalties are unlikely to happen.
The higher tariffs on Chinese EVs (both battery and plug-in hybrids) have garnered headlines from Biden’s latest tariffs, but they have also been levied on less popular items such as computer chips and medical products, as well as the Trump-era tariffs, which remain in place and are more sweeping. Increased tariffs on some steel and aluminum imports will also be applied.
So, from the point of view of Australian battery and associated minerals and products, the tariffs aimed at Chinese EVs are a damp squib. The US has already targeted Chinese batteries and raw materials through the structure of 2022’s Inflation Reduction Act, which provides $369 billion in loans, subsidies, and other assistance to companies and countries with which the US has a free trade agreement or special trade arrangements—these include Australia, Chile, Canada, and Mexico, but not Argentina, China, or the EU.
Data from the Chinese car industry shows how the car sector is ramping up exports of both types of EVs, collectively known as NEVs, and conventionally powered vehicles.
From January to April, China’s NEV production and sales volumes reached around 2.985 million units and 2.94 million units, respectively, up 30.3% and 32.3% from the first four months of 2023.
NEVs accounted for 32.4% of China’s auto sales in the period (and 43% in April alone when car production and sales fell from March).
Of the NEVs sold in the first four months of this year, 2.52 million units were sold in China, up 34.4% compared to the same time in 2023, and Chinese carmakers shipped 421,000 NEVs to overseas markets, up 20.8% year-on-year.
In April alone, 504,000 vehicles were exported from China to overseas markets, up 0.4% from March and 34% from April 2023. Among the vehicles exported last month, about 429,000 units were passenger cars, up 1.2% and 36% from the month-ago and year-ago periods.
In the first four months of 2024, China’s cumulative auto export volume totaled 1.827 million vehicles, up a third from the same period in 2023, heading for more than a record 7 million this year (just under five million in 2023).
Year-to-date exports of passenger cars totaled 1.539 million units, up 34.8% year on year. Exports of commercial vehicles totaled 288,000 units, up 26.5% from a year earlier, overtaking Japan and South Korea. And few, if any, vehicles were shipped to the US.
