The new Chinese EV tariffs are a horrible idea for a number of reasons. Some of which I’ve laid out here.
But now they’re just embarrassing.
Last week, the CEO of BYD (OTCBB: BYDDY), Wang Chuanfu, suggested that the U.S. government is “afraid” of Chinese EVs. And at an industry event said …
“If you are not strong enough, they will not be afraid of you.”
He’s right.
When it comes to delivering “affordable” electric cars, the U.S. simply can’t compete with China EV makers. In fact, BYD is now selling a new electric car called the Seagull for just $12,000. To be sure, such a vehicle would likely cost closer to $25,000 in the United States, if BYD was allowed to sell it here. This, mostly as a result of strict and costly regulatory requirements coupled with a basic tariff (Japan pays about 2.5% as opposed to the 100% tariff that Biden wants to put on Chinese EVs).
But even at $25,000, the Seagull would likely sell quite well in the U.S. given that it would be the most affordable EV on the market with a range of at least 250 miles.
Chinese EV Tariffs Won’t stop China’s EV Dominance
In all fairness, some of China’s competitive advantage can be traced back to currency manipulations, massive government subsidies, and abuses of intellectual property. But it can also be traced back to the Middle Kingdom’s decision to support the development of its EV industry while the U.S. both ignored and mocked it.
Truth is, the U.S. could’ve easily dominated the global EV market had legacy carmakers spent more time investing in the transition away from internal combustion, instead of criticizing it. Now, they’re trying to catch up to the Chinese.
To be sure, they will. Eventually.
In fact, according to a new report from Bloomberg, long-range EVs now cost less than the average new car in the U.S. Check it out …
A stricter definition of price parity is the point at which the average EV costs the same as the average internal combustion engine, excluding gas savings and government subsidies. That upfront affordability is key for the later stages of widespread adoption.
American car buyers demand more range from electric vehicles than drivers in any other country. The average EV now comes with about 300 miles, and with a few of those models selling for less than the average car, others will surely follow. The IEA says price parity will be the norm by 2030.
Price parity is important. But so is affordability.
The average price of a new car in the U.S. today is around $47,000. Clearly, “average” is still too much for a lot of car buyers. So imagine a $25,000 EV showing up at the dealership. A car, by the way, that would likely save drivers at least $2,000 a year on fuel costs.
Most U.S. drivers keep their new cars for about 8 years before getting a new one. So if we assume a $2,000 a year savings on fuel costs (which is conservative, as I’ve saved about $2,000 in fuel costs in just the past six months), you’re looking at a total savings of around $16,000. Deduct that from the $25,000 retail price, and this car ends up costing you around $9,000.
It doesn’t take a rocket scientist to see why legacy car makers would champion those steep Chinese EV tariffs. But those tariffs only apply to the U.S. It’s a big world out there, and don’t think for a second that China will not do everything in its power to dominate the global market for EVs. So keep a close eye on BYD, as well as some of the other major Chinese EV makers. While I’m not partifuclarly bullish on any Chinese EV maker except for BYD, it’s still worth it to keep the bigger players on your radar. These include, but are not limited to ..
- Li Auto (NASDAQ: LI)
- XPeng (NYSE: XPEV)
- NIO (NYSE: NIO)
