Alternating Current

If the domestic auto industry didn’t have enough to worry about fulfilling government mandates for electric vehicles that are expensive relative to gas-powered offerings, take too long to charge, and rely on battery minerals largely controlled by foreign entities, now comes a wave of cheap imports from China.
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If the domestic auto industry didn’t have enough to worry about fulfilling government mandates for electric vehicles that are expensive relative to gas-powered offerings, take too long to charge, and rely on battery minerals largely controlled by foreign entities, now comes a wave of cheap imports from China.

Consider the average cost of an EV built in America is around $53,000, compared to $34,000 for a car with an internal combustion engine. In Europe, however, where Chinese automakers are now entering the marketplace with EVs, the price for a BYD Atto 3 SUV is roughly $43,000, while the MG5 EV has a starting price of $38,500. And that’s with an import tariff of 10 percent.

To keep Chinese EVs from the U.S. marketplace, President Joe Biden and his administration made sure the legislation for “Buy America” tax credits excluded imported vehicles. In turn, President Donald Trump instituted a 25 percent tax on Chinese EV imports. But those barriers might not be enough.

Already, China’s BYD could soon surpass Tesla as the largest producer of EVs in the world. Eager to maintain its leading manufacturing position and avoid U.S. tariffs, BYD and its domestic rival MG are making plans to build cheap EVs in Mexico. Chery, another Chinese EV producer, has already started building a plant south of the U.S. border.

At the same time, Polestar, which produces luxury EVs in partnership with China’s Geely and its Volvo unit, plans to start production of battery-powered vehicles in South Carolina later this year. The effort would allow the automaker to avoid the U.S. tariff. If successful, it’s only a matter of time before Polestar starts offering cheaper EVs to local consumers.
All of which leaves domestic automakers vulnerable to the Chinese government, which provides massive subsidies as it relates to global EV supply chains.

Still, foreign EV producers face the same barriers to greater adoption of battery-powered vehicles in the U.S. — namely, too few public chargers, long charging times, costly repair expenses, upgrades to the electric grid so that two or more homeowners on a given block can charge their vehicles overnight, and minimal charging options in urban and rural environments.

As an example of the long road ahead for greater adoption of EVs in the U.S., Hertz announced in January it was selling a third of its fleet (20,000 vehicles) of mostly Teslas due to lackluster demand, high repair costs, and a decline in overall consumer spending. The car rental company follows the path of several domestic automakers that have cut their EV production plans due to waning consumer interest.

Another factor propping up domestic automakers is a 25 percent tariff on pickups produced in other countries. The levy has forced automakers like Toyota, Honda, Nissan, and Mitsubishi to build plants in the U.S. The effort has met some success, but it has been a struggle given pickup buyers in America are largely loyal to domestic manufacturers.

Looking at the big picture, the U.S. auto industry has benefited greatly from tariffs imposed on EVs and pickups. But if either one, or both, of those excise taxes are lowered or eliminated, General Motors Co., Ford Motor Co., the domestic arm of Stellantis, and even Tesla will have their hands full maintaining their respective market shares.


Inside the Numbers

$53,000 – The average cost of an EV in the U.S.

$34,000 – Average cost of internal combustion engine vehicle in the U.S.

2/3 percent – Percentage of global EVs produced by Chinese manufacturers.

Source: Cox Automotive