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Punitive tariffs on Made in China EVs likely to restrain BYD, Leapmotor and peers from US market, hurt go-global plans

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Punitive tariffs on Chinese-made electric vehicles (EV) by the Biden administration are likely to deter BYD, Zhejiang Leapmotor and local peers from pushing their sales in the US, even as they accelerate the pace of electrification in the global automotive industry, analysts said.

Some EV makers in mainland China will turn cautious on their overseas expansion drive after the US proceeded to slap a 100 per cent duty on imported Chinese battery-powered cars, they added. These carmakers are already bracing themselves for another blow in Europe, after the European Commission started a probe last year into Beijing’s subsidies for carmakers.

“The US market is of vital importance to the global automotive industry,” said David Zhang, director of WDEF Digital Automotive International Cooperation Research Centre in Shanghai “Chinese EV assemblers will face big hurdles in building brand awareness around the world without strong sales in the US.”

The White House on Tuesday announced a quadrupling of tariffs on Chinese-made EVs from 25 per cent, in an array of measures to hit US$18 billion of Chinese imports that it said would protect US companies from unfair subsidies doled out by Beijing to its companies. Lithium batteries, steel, critical minerals, solar cells, and semiconductor chips were also slapped with higher levies.

President Joe Biden was also expected to maintain tariffs on more than US$300 billion worth of Chinese goods that were imposed during Donald Trump’s presidency, taxes that sparked a costly trade war between the world’s two biggest economies.

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‘Overtaking on a bend’: how China’s EV industry charged ahead to dominate the global market

‘Overtaking on a bend’: how China’s EV industry charged ahead to dominate the global market

China had earlier responded to the imminent hikes by saying the US was politicising trade issues, while abusing the so-called review process of tariffs. China will take all necessary measures to defend its rights and interests, said Lin Jian, a spokesman for the Foreign Ministry.

The tariff hikes also came amid mounting worries in Washington about the risks posed by smart vehicles built by mainland EV manufacturers. Commerce Secretary Gina Raimondo said in January that those vehicles would collect a “huge amount of information about a driver” in the US.

While China is the runaway leader in the global EV sector, where sales of pure electric and plug-in hybrid cars account for 60 per cent of the global total, nearly no EVs made in China are sold in the US.

Most mainland-built EVs fall into the category of intelligent cars, as they are fitted with autonomous driving systems. Intelligence is also measured by the cars’ digital bells and whistles, manifested in such built-in features as voice-activated controls, facial recog­nition, over-the-air software upgrades and phone-linked features.

Robotic arms assemble cars in Zhejiang Leapmotor’s factory in Jinhua in eastern Zhejiang province in April 2023. Photo: China Daily via Reuters

“When a carmaker moves to tap markets outside, it also develops and builds specific models to cater to local customers and comply with foreign laws and regulations,” said Chen Jinzhu, CEO of consultancy Shanghai Mingliang Auto Service. “Taking the long view, trade barriers erected by the US will affect confidence among carmakers in their go-global strategy, even though America is not their key target market yet.”

State subsidies for Chinese EV makers could also result in higher tariffs on their shipments into markets in Europe, following a probe by the European Commission last September. Chinese carmakers pay the standard rate of 10 per cent on their exports to the single market on the continent.

In a teardown report last month on BYD’s pure-electric Seal EV, the Swiss investment bank found that the sedan model has an advantage over Tesla’s Model 3 assembled in mainland China. Its production cost was estimated to be 15 per cent lower than Model 3, the report said.
A BYD Seal model car on display at the Geneva International Motor Show in February 2024. Photo: AFP

Chinese-made cars are benefiting from a faster pace of electrification at home, itself the world’s largest automotive and EV market. They will control 33 per cent of the global market by 2030, up from 17 per cent in 2022, analysts at UBS Group forecast in a report in September.

Chinese carmakers have long desired to go global under Beijing’s Made in China 2025 industrial strategy, under which the country’s top two EV makers are expected to generate 10 per cent of their sales from overseas markets by 2025.

“Chinese carmakers are likely to go to Europe first, among large mature markets, while they wait and see how the US political situation evolves,” said Stephen Dyer, Greater China co-leader and head of the Asia automotive practice at global consultancy AlixPartners.

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