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 on September 13 and set to take effect September 27, follows a four-year review prompted by what the Office of the US Trade Representative called unfair trade practices.
The US 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 September 13’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 US 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 US 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 USD 25,000.
In the US, not even frontrunner Tesla has broken into the sub-USD 30,000 price range. There are no American EVs as cheap as gasoline-powered vehicles yet.
Joe McCabe, CEO of US research company AutoForecast Solutions, said BYD’s lowest price in the US is USD 12,000. Even with a 100% tariff, BYD will have the cheapest EV in the market at under USD 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.
US imports of Chinese-made batteries totaled USD 6.2 billion in the January-June half. The 2023 figure of USD 13 billion was a roughly a 40% increase from 2022 and a sixfold jump over three years.
Some in the US 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 US automakers to rethink investment plans. General Motors has postponed the start of production at its battery factory in the US 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 US for mining and processing battery materials,” said a Japanese automobile executive at a North American subsidiary.
China’s Ministry of Commerce hit back at the US tariff announcement on September 14, 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 trade deficits and industrial competitiveness problems in the US, the ministry said in a statement.