The U.S.' war on the Chinese electric car been taken to the extreme with the country's new 100% import tariff, which is four times the previous rate, announced earlier this month. However, it wasn’t a surprise, considering that former President Donald Trump had already threatened a similar tariff; his successor, Joe Biden, just went along with the move.
That wasn't the only disadvantage faced by Chinese automakers, though. Previously, Chinese automakers not only paid the previous 25% tariff, which could make them less competitive, but they were also left out of the Inflation Reduction Act of 2022. Given that they don't make their cars in the U.S., Mexico, or Canada, that means that Chinese automakers won’t receive any of the subsidies authorized by the law.
BYD said it was considering manufacturing in Mexico to receive these subsidies. In any case, sales of Chinese cars in the U.S. are a testimony.
An almost nonexistent market. A few non-Chinese manufacturers do sell some Chinese-made models in the U.S. Volvo is one example with the S90 and Buick is another with the Envision, but there’s no market for Chinese cars.
Just look at the table of 2023 car sales by manufacturer published by CarPro: There are American, Japanese, German, South Korean, Italian, and even a Swedish brand—with Volvo—but no Chinese brands. Fiat closes the list with only 605 cars sold in the last year. The list isn't complete, though. Some manufacturers are missing because they don’t report the exact number of units sold, according to the outlet.
The situation is a stark contrast with markets like Europe, where Chinese manufacturers have gone from no presence to a significant market share in just a few years.
Political barriers. Trade tensions between China and the U.S. have led to the these tariffs, which complicate the arrival of Chinese cars on American soil. However, they don't end any Chinese car manufacturer's business because they didn't have a business in the country to begin with.
It will hardly happen now that Chinese car manufacturers have to double the price of their units to sell them. The new import tariff won’t affect established companies but will deter new market entrants.
The local production strategy. If Chinese manufacturers like BYD decided to produce in Mexico, they could take advantage of North American trade agreements to enter the U.S. market.
However, in such a hostile political climate, no one can guarantee that governments won’t change the rules to prevent such access.
Perception and desire. Chinese manufacturers would also have to contend with a local perception that is likely to be hostile, or at least less receptive, than in other countries with a GDP per capita much lower than that of the U.S. and no conflicts with China.
Another factor is that it isn’t just the perception of a Chinese brand but also concerns about the quality and safety of the car. Also, in terms of EVs, people in the U.S. need cars with a very long range to cover the long distances and the geographic pattern of the territory, and Chinese brands don’t stand out in this area as much as Tesla.
Economic realities also mean that brands sell significantly more expensive vehicles in the U.S. than in other countries that have been quick to embrace Chinese cars.
The global breakthrough. Despite this barrier to entry in the U.S., Chinese brands continue to disrupt the global auto industry. In China, brands like BYD, Changan, Geely, Wuling, Nio, and Xpeng already occupy several top 10 sales positions. In other countries, MG and Omoda are gaining popularity.
And the big upset for the U.S.: BYD snatched the top electric car sales position from Tesla in 2023.
Image | Xataka On and Midjourney