Chinese EVs still cheaper than Teslas in U.S. after tariff hike
Supply chain advantages help BYD and others compete on price
WASHINGTON/NEW YORK -- Even after the Biden administration's huge tariff increase on imported Chinese electric vehicles takes effect, some models will remain cheaper than competing American cars, a sign of the deep-set challenges facing Washington's EV policy.
The 100% duty on EVs, announced Friday and set to take effect Sept. 27, follows a four-year review prompted by what the Office of the U.S. Trade Representative called unfair trade practices.
The U.S. imports few EVs from China, so the administration's move, part of a broader increase in tariffs on Chinese goods, is largely preventative and meant to buy time for American industry to catch up.
"China's industrial policies targeting electric vehicles could threaten federal investment in the sector," the USTR said in a notice on Friday's actions.
Although the Biden administration has sought to accelerate a transition to EVs with government aid, China retains a wide lead in both production and adoption after a decadelong national effort.
EVs made up more than 10% of U.S. vehicle sales in July, but in China, the ratio was around 50% -- well above the global average of about 20%, according to market research company MarkLines.
The U.S. lacks both EV charging infrastructure and models in the mass-market price range. Big Chinese automakers like BYD, meanwhile, draw on extensive domestic supply chains that help them compete in a crowded market, offering EVs priced under $25,000.
In the U.S, not even front-runner Tesla has broken into the sub-$30,000 price range. There are no American EVs as cheap as gasoline-powered vehicles yet.
Joe McCabe, CEO of U.S. research company AutoForecast Solutions, said BYD's lowest price in the U.S. is $12,000. Even with a 100% tariff, BYD will have the cheapest EV in the market at under $25,000.
Chinese automakers do not care about profitability, McCabe said.
The Biden administration is wary of Chinese automakers trying to circumvent tariffs. Even if BYD were to build a factory in Mexico, for example, "it is a Chinese company," Commerce Secretary Gina Raimondo said at a supply chain summit hosted with the Council on Foreign Relations this month.
Another concern for Washington is the slow progress on cutting reliance on China for batteries, which account for 30% of EV costs.
U.S. imports of Chinese-made batteries totaled $6.2 billion in the January-June half. The 2023 figure of $13 billion was a roughly a 40% increase from 2022 and a sixfold jump over three years.
Some in the U.S. called on the administration to exempt Chinese-made EV batteries from higher tariffs. But the USTR said it "has determined that the requests to remove particular batteries are inconsistent with the president's direction, which broadly covers all lithium-ion batteries, and are inconsistent with the goals of diversifying supply chains and of reducing our reliance on China in an industry targeted by China for dominance."
The lack of progress in building an EV supply chain is forcing some American automakers to rethink investment plans. General Motors has postponed the start of production at its battery factory in the U.S. state of Indiana by about a year, a project that includes Samsung SDI as a partner.
Japan's Panasonic Holdings has lowered its production target for EV batteries, mainly in North America, by about 30% from the previous plan.
"The reality now is that there is no supply chain in the U.S. for mining and processing battery materials," said a Japanese automobile executive at a North American subsidiary.
China's Commerce Ministry hit back at the U.S. tariff announcement on Saturday, saying, "China will take necessary measures to resolutely defend the interests of Chinese companies."
The tariffs will disrupt global supply chains but not contribute to resolving the U.S.'s trade deficits and industrial competitiveness problems, the ministry said in a statement.
Additional reporting by Yukio Tajima in Beijing.