WASHINGTON (news agencies) — It’s a scenario that terrifies America’s auto industry.
Chinese carmakers set up shop in Mexico to exploit North American trade rules. Once in place, they send ultra-low-priced electric vehicles streaming into the United States.
As the Chinese EVs go on sale across the country, America’s homegrown EVs — costing an average of $55,000, roughly double the price of their Chinese counterparts — struggle to compete. Factories close. Workers lose jobs across America’s industrial heartland.
Ultimately, it could all become a painful replay of how government-subsidized Chinese competition devastated American industries from steel to solar equipment over the past quarter-century. This time, it would be electric vehicles, which America’s automakers envision as the core of their business in the coming decades.
“Time and again, we have seen the Chinese government dump highly subsidized goods into markets for the purpose of undermining domestic manufacturing,’’ Sen. Sherrod Brown, an Ohio Democrat, wrote in an April letter to President Joe Biden that called for an outright ban on Chinese electric vehicles in the U.S. “We cannot let the same occur when it comes to EVs.’’
Low-priced Chinese EVs pose a potentially “extinction-level event’’ for America’s auto industry, the Alliance for American Manufacturing has warned.
The trade deal that Beijing could potentially exploit — the U.S.-Mexico-Canada Agreement — was negotiated by the Trump administration and enacted in 2020. Its rules could let Chinese autos assembled in Mexico enter the United States, either duty-free or at a nominal 2.5% tariff rate. Either way, China could sell its EVs well below typical U.S. prices.
To defuse the threat, the U.S. does have options. Customs officials could rule that Chinese EVs don’t qualify for the low-duty or duty-free benefits of being assembled in Mexico. U.S. policymakers could also pressure Mexico to keep Chinese vehicles out of that country. Or they could bar Chinese EVs from the U.S. on the grounds that they would threaten America’s national security.
For his part, Donald Trump told Time magazine in April: “I will tariff them at 100%. Because I’m not going to allow them to steal the rest of our business.’’
Whatever steps the U.S. government might take, though, would likely face legal challenges from companies that want to import the Chinese EVs.
The threat from Beijing is emerging just as U.S. automakers face slowing EV sales even while investing billions to produce them in a high-priced bet that Americans will embrace battery-powered autos in the coming decades. Comparatively high prices, despite federal tax incentives for buyers, have weakened EV sales in the United States. So has public anxiety about a scarcity of charging stations, potentially made worse by rising thefts of cables at charging stations.
Optimists suggest that an influx of ultra-low-priced Chinese EVs could accelerate U.S. electric vehicle purchases, speed up investment in charging stations and force down prices.
“It would be cheaper just to let the Chinese cars come in, forget all the tariffs and subsidies, let the market figure it out,’’ said Christine McDaniel, a senior research fellow at George Mason University’s Mercatus Center who was a trade official in the George W. Bush administration. “Yes, it would be disruptive. But EVs would get on the road in the U.S. a lot faster.”
At stake is an enormously consequential question: Who stands to dominate the manufacture and sale of zero-emissions electric vehicles?
China has so far taken a daunting lead. It accounted for nearly 62% of the 10.4 million battery-powered EVs that were produced worldwide last year. The United States, at No. 2, made about 1 million — less than 10% of the total, according to the consulting and analysis firm GlobalData.
In achieving technological breakthroughs while holding down costs, Chinese automakers have made remarkable strides. China’s BYD last year introduced a small EV called the Seagull that sells for just $12,000 in China ($21,000 for a version sold in some Latin American countries). Considered a marvel of engineering efficiency, its lightweight design allows the Seagull to go farther per charge on a smaller battery. BYD has said it’s considering building a factory in Mexico — but only for the Mexican market.
U.S. policymakers and auto companies are less than reassured.
“Just look at China — look at how big their market share is in EVs,’’ John Lawler, Ford Motor’s chief financial officer, said at this month’s Deutsche Bank Global Auto Industry Conference. “Those are significant competitive threats we need to deal with. They have a development process that is much faster — 24 months.’’ (By contrast, U.S. vehicles have typically undergone development for four to five years, though that’s been reduced to three years or less for EVs.)
Critics note that BYD and other Chinese EV makers have achieved their cost efficiencies thanks to heavy government subsidies. Beijing spent 953 billion Chinese renminbi (more than $130 billion at current exchange rates) on EVs and other green vehicles from 2009 through 2021, according to researchers at the Center for Strategic and International Studies.
“It’s not competition,’’ Biden asserted last month. “It’s cheating.’’
United Arab Emirates Dirham Exchange Rate
