EXPORT SALES
The real test of how well Chinese vehicles appeal to consumers will come from export sales. Chinese EV manufacturers are eager to sell abroad because their factories can produce far more than the 25 million vehicles they can sell within China each year – perhaps twice as much.
China already exports more cars than any other nation, though primarily gas-powered ones at the moment. Export markets for Chinese EVs are developing in Western Europe, Southeast Asia, Latin America, Australia and elsewhere.
The largest market where Chinese vehicles, whether gasoline or electric, are not being sold is North America. Both the US and Canadian governments have created what some have called a “tariff fortress” protecting their domestic automakers, by imposing tariffs of 100 per cent on the import of Chinese EVs – literally doubling their cost to consumers.
Customers’ budgets matter too. The average price of a new electric vehicle in the US is approximately US$55,000. Less expensive vehicles make up part of this average, but without tax credits, which the Trump administration is eliminating after September, nothing gets close to US$25,000.
By contrast, Chinese companies produce several sub-US$25,000 EVs, including the Xpeng M03, the BYD Dolphin and the MG4 without tax credits. If sold in America, however, the 100 per cent tariffs would remove the price advantage.
Tesla, Ford and General Motors all claim they are working on inexpensive EVs. More expensive vehicles, however, generate higher profits, and with the protection of the “tariff fortress”, their incentive to develop cheaper EVs is not as high as it might be.
In the 1970s and 1980s, there was considerable US opposition to importing Japanese vehicles. But ultimately, a combination of consumer sentiment and the willingness of Japanese companies to open factories in the US overcame that opposition, and Japanese brands like Toyota, Honda and Nissan are common on North American roads. The same process may play out for Chinese automakers, though it’s not clear how long that might take.
Jack Barkenbus is Visiting Scholar at Vanderbilt Institute for Energy & Environment, Vanderbilt University. This commentary first appeared on The Conversation.
