US Tariffs on Chinese EVs: Implications for Australia
The Biden administration has imposed a 100 percent tariff on Chinese electric vehicles (EVs), up from the previous 25 percent, effectively stripping them of their competitive edge in the United States. This aggressive stance is part of broader measures targeting Chinese-made batteries and semiconductors, which now face additional tariffs of 25 percent and 50 percent respectively.
“American workers can out-work and out-compete anyone as long as the competition is fair, but for too long it hasn’t been fair,” President Joe Biden said in a statement to Reuters. “We’re not going to let China flood our market.” The president pointed out that Chinese government subsidies allow the country’s carmakers to operate without the necessity to turn a profit, creating an unfair advantage in global trade.
The impact of these tariffs is twofold. Firstly, Chinese electric cars are now effectively shut out of the United States, just as many brands were gearing up for aggressive global expansion. Secondly, the tariffs on batteries and semiconductors, critical components of electric vehicles, further hinder China’s competitive position in this burgeoning market.
Ripple Effects in Europe and Australia
Europe may soon follow in the footsteps of the U.S. The European Union is investigating Chinese state-owned automakers to determine if government investments have led to artificially low prices. If similar actions are taken, Chinese EV manufacturers could find themselves locked out of two major markets.
Given China’s ambitious manufacturing targets, the country needs to keep its factories running. With the U.S. market closing its doors, excess supply must find new destinations, and Australia stands as a ripe opportunity.
Already this year, six Chinese car brands—GAC, JAC, Leapmotor, Skywell, Xpeng, and Zeekr—have committed to launching in Australia. This is in addition to the established presence of BYD, Chery, GWM, LDV, and MG. Notably, car-making giant Geely, which owns Polestar and Volvo, is actively recruiting senior executives in Sydney, signalling another imminent entry into the Australian market.
These Chinese brands are entering an increasingly favourable environment. Australia’s New Vehicle Emissions Standards (NVES), passed through parliament this week, impose fines on car brands for each vehicle sold over a certain emissions threshold. This creates a financial incentive to sell electric or low-emission vehicles, making affordable Chinese EVs even more attractive to consumers.
Chinese manufacturers are well-prepared for this market shift. Xpeng’s Australian importer, Jason Clarke, highlighted the company’s robust financial foundation and technological capabilities, stating, “Their market cap is US$10 billion. I read they have six billion in cash ready to deploy, they’ve got their own tech stack, they’ve got 3000 people in R&D and 800 in AI. They want to be a major player globally in EVs and I think they’re set-up to do it.”
In contrast, some traditional players are struggling to meet the demand for EVs. Kia and Hyundai have faced supply challenges, Volkswagen has yet to introduce an electric model in Australia, and Toyota’s initial foray into the EV market has been underwhelming. Tesla, however, has managed to keep up with demand due to its production capacity in China.
Competitive Advantages
Chinese brands hold several competitive advantages. For instance, Volvo, owned by Geely, benefits from a free trade agreement between China and Australia, reducing tariffs by five percent compared to imports from Europe. Stephen Connor, head of Volvo’s local arm, emphasised the logistical benefits: “Thanks to Chinese production (for models like the recently released EX30) we’re three weeks away from build to showroom whereas Europe is six to nine weeks. We can get an increase in volume within three to four weeks.”
This logistical efficiency, combined with cheaper production costs, makes Chinese EVs more adaptable and cost-effective on Australian roads than their competitors.
