InformedInsights

Get Informed, Stay Inspired

Despite tariffs, Chinese EV makers still make inroads
Americas Economy Europe Technology

Despite tariffs, Chinese EV makers still make inroads

Chinese electric vehicle behemoth BYD announced a new partnership this week with Uber that aims to bring 100,000 new EVs to the ride-sharing app globally.

The international collaboration, which starts in Europe and Latin America, will expand to the Middle East, Canada, Australia and New Zealand, offering accessible pricing and financing for BYD’s EVs on Uber’s platform.

Analysts say the agreement is just one example of how Beijing is still finding ways to penetrate international markets to continue expanding its global lead in the EV sector, despite looming tariffs and increased concern about Chinese electric vehicle dominance.

One notable country left out of the BYD-Uber agreement is the United States, which is expected to start implementing a 100% tariff rate on Chinese EVs later this month.

The EU and U.S. recently announced plans to hit Chinese EVs with tariffs amid concerns that a potential flood of cheaper electric vehicles could hit their markets and affect domestic automakers.

China says the moves are protectionist, but Washington and Brussels argue that Beijing’s big subsidies for electric vehicles are to blame.

Nearshoring and partnerships

Although the United States is not included in the BYD-Uber agreement, Chengyi Lin, an affiliate professor at Insead University, said, “The question really is, to me, not whether Chinese EVs are going to go into the U.S. market; the question is, really, how?”

Lin, along with other experts, add that nearshoring — transferring factories and manufacturing operations to a neighboring country — and manufacturing abroad are other ways for China to continue entering global markets, including the United States.

“China has already set up a manufacturing facility in Thailand because there’s huge demand in Southeast Asia. That could happen for [the] North American market as well, or for [the] European market,” Lin explained.

BYD announced plans in July to build a billion-dollar factory in Turkey, and late last year it announced the construction of a plant in Hungary. Both countries have close ties with Beijing and are part of the EU.

Nearshoring, particularly in Mexico, is one route for China to gain access to the U.S. EV market, said Tom Moerenhout, professor and critical materials lead at the Columbia University Center on Global Energy.

“The biggest threat is that they [Chinese electric vehicles] come in the country via Mexico or via other countries with which the U.S. has a very advanced trade agreement,” he said.

“So, the way that looks like is, basically, Chinese EV companies set up shop in Mexico and as a result, they are able to export to the United States,” he said.

BYD is already in talks in Mexico to build a factory there, and even as Canada considers its own EV tariffs, Reuters reported earlier this week that the company is looking to enter the market there as well.

Back doors

Currently, the United States-Mexico-Canada Agreement, or USMCA, allows “the relatively free flow of goods between the U.S., Canada and Mexico, [which] does leave space for Chinese components to be coming from Mexico,” said Mark Kennedy, director of the Wahba Institute for Strategic Competition at the Wilson Center.

But Moerenhout and Kennedy noted that the U.S. is already working to make sure China is not taking advantage of the trade agreement.

“The U.S. trade representative [Katherine Tai] has very clearly said to Mexico, and publicly, the fact that China might bring in electric vehicles through Mexico, and then export them under this trade agreement, is a problem for us,” said Moerenhout.

Kennedy said that there is sharp focus from “both the [Biden] administration and Congress that we not allow USMCA to be a back door for Chinese goods that we were otherwise hoping to not be included in American supply chain.”

Part of the reason for the United States’ and EU’s fear of China’s EV dominance, Lin said, is the potential for new cars to upend the traditional automobile industry.

Chinese EVs are “not only cheap but at high quality with better technology,” he said.

“When you have such a good quality and low-priced product into the market, the traditional industry might be disrupted.”

Green transition vs. jobs

In addition, the United States and EU see China’s EV dominance as a potential threat to the advancement of their own green technology industries and job markets.

The EU fears China’s growing market share threatens 2.5 million auto industry workers as well as 10.3 million more people whose jobs indirectly depend on producing electric vehicles.

China says efforts taken by the U.S. and EU are unjustified and potentially slowing down the global-green transition.

Lin said that despite concerns, electric vehicles can have a meaningful impact in moving the green transition forward.

“If you really want to drive meaningful change around energy transition within transportation, mass market adoption of electric vehicles is key,” he told VOA.

Kennedy said the U.S. and EU are in a tough situation in which they must balance protecting their own industries against advancing the green transition.

“I mean it’s the old walking and chewing gum at the same time challenge,” he said. “We want to move on the green transition, we want to maintain an industrial base. If you’re only worried about the green transition, allowing cheap EV vehicles might accelerate your path toward that end.”

But, he added, it could also leave a hollowed-out industrial core.

Source: voanews.com