May 22, 2024

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A few Chinese electric cars are sold in the United States, but the industry fears a flood

A few Chinese electric cars are sold in the United States, but the industry fears a flood

The Biden administration’s new tariffs on Chinese electric vehicles will not have much immediate impact on American consumers or the auto market because very few of these vehicles are sold in the United States.

But the decision reflects deep concern within the American auto industry, which has become increasingly concerned about China’s ability to produce cheap electric cars. US automakers welcomed the Biden administration’s decision on Tuesday to impose 100 percent tariffs on electric vehicles from China, saying those vehicles would undermine billions of dollars in investments in electric vehicle and battery factories in the United States.

“Today’s announcement is a necessary response to combat the Chinese government’s unfair trade practices that are putting the future of our auto industry at risk,” Sen. Gary Peters, a Michigan Democrat, said in a statement. “This will help level the playing field, keep our auto industry competitive and support good-paying union jobs here at home.”

President Biden on Tuesday announced a series of new and increased tariffs on some Chinese-made goods, including 25% duties on steel and aluminum and 50% duties on semiconductors and solar panels. The tariff on electric cars made in China has quadrupled from 25 percent. Chinese lithium-ion batteries for electric vehicles will now face a 25 percent tariff, up from 7.5 percent.

The United States imports only a small number of products – electric or gasoline – from China. One is the Polestar 2, an electric car made in China by a Swedish automaker in which China’s Zhejiang Geely holds a controlling stake. Polestar said in a statement that it was evaluating the impact of Mr. Biden’s announcement.

“We believe that free trade is essential to accelerate the transition to more sustainable mobility through increased adoption of electric vehicles,” the company said.

In the first quarter of this year, Polestar sold only 2,200 vehicles in the United States. However, later this year it is scheduled to begin production of a new model, the Polestar 3, at a plant in South Carolina operated by Volvo Cars, which Geely owns.

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Volvo sells a Chinese-made hybrid sedan, the S90 Recharge, in the United States, and plans to start importing a new small sports car, the EX30, into the United States from China this year. The car is expected to start at $35,000, making it one of the most affordable battery-powered models available in the country. It has quickly become a model Volvo’s best-selling car in Europe.

Volvo said on Tuesday it was assessing the potential impact of Mr. Biden’s new tariffs on its plans.

Internal combustion models made in China and sold in the United States include General Motors’ Buick Envision SUV and Ford Motors’ Lincoln Nautilus. They are not affected by tariffs.

Companies like Tesla, GM, Ford, Volkswagen, Hyundai, and many other automakers have invested tens of billions of dollars in battery and electric vehicle factories in the United States. But with the exception of Tesla, automakers in the United States, Europe and Japan lag behind Chinese companies in terms of volume, production of raw materials and key technologies.

Contemporary Amperex Technology Company Limited, or CATL, the Chinese manufacturer that is the world’s largest producer of electric vehicle batteries, said last month that it had developed a battery that can be charged enough in 10 minutes to allow a car to travel about 370 miles. This is a big leap compared to the batteries used by Western and Asian automakers, including Tesla.

China’s leadership in electric vehicles, seen as key to the future of the auto industry, has raised concerns that Chinese cars may reach the US market at prices that General Motors, Ford and other traditional automakers will not be able to compete with.

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BYD, a leading and fast-growing Chinese auto and battery company, sells a compact electric car, called the Seagull, for less than $15,000 in China. On Tuesday, it said it would begin selling a hybrid pickup truck in Mexico, though it added that it did not yet plan to sell the vehicle in the United States.

Chinese automakers such as BYD, Geely and SAIC are working to increase car exports to Europe, Latin America and various Asian countries. The European Commission, the executive arm of the European Union, is investigating Chinese government support for electric car makers.

Some US auto industry representatives said the Chinese government’s support for its automakers left factories there with the capacity to produce far more cars than could be sold in the country.

“They have a big problem with electric vehicle overcapacity,” said John Bozzella, president of the Alliance for Automotive Innovation, the main lobbying arm for U.S. automakers.

“They make too many EVs – too many heavily subsidized EVs – for the domestic market and have no choice but to look abroad to offload those vehicles at budget prices,” Mr Bozella added. “The competitiveness of the U.S. auto industry will be harmed if heavily subsidized Chinese electric vehicles can be sold at below-market prices to American consumers.”

Chinese officials have denied that the country is overproducing electric cars, solar panels and other products targeted by the Biden administration. “We hope the United States can take a positive view of China’s development and stop using excess capacity as an excuse for trade protectionism,” Liu Bingyu, spokesman for the Chinese Embassy in Washington, said on Tuesday.

Automakers have already gotten a taste of how price competition can disrupt their electric vehicle plans. Over the past year, Tesla has reduced the prices of its models several times, reducing the costs of some models by more than 20 percent overall. These cuts, coupled with slowing growth in electric vehicle sales, have made it extremely difficult for GM and Ford to make money from battery-powered models.

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In the first three months of the year, Ford’s electric vehicle division lost $1.3 billion before taking into account some expenses. Both Ford and General Motors have slowed electric vehicle production and delayed the introduction of new models. While GM is losing money on electric vehicles, the company said it expects these vehicles to start turning a profit later this year.

The Biden administration has sought to support and encourage battery and electric vehicle production in the United States to address climate change and encourage more domestic manufacturing.

China is not the only obstacle in the way. Americans’ enthusiasm for electric vehicles has waned over the past year, mainly because these vehicles are sold at relatively high prices. Some buyers are also hesitant to buy because they are not sure there are enough places to charge these cars easily and quickly.

In the first quarter of this year, 269,000 electric vehicles were sold in the US market, according to Kelley Blue Book. This represents an increase of only 2.6 percent over the previous year. Total sales of cars and light trucks grew by more than 5 percent to reach 3.8 million vehicles.

“In many ways, purchasing an electric vehicle requires a lifestyle change,” said Jessica Caldwell, executive director of insights at Edmunds, a market researcher. “A lot of people say, ‘I don’t want the hassle of an electric car.’”

Alan Rapaport Contributed to reports.