Donald Trump’s return to the White House is likely to complicate the outlook for the Chinese electric vehicle (EV) makers that are seeking to enter the US market after being hit with new tariffs from the Joe Biden administration.
The president-elect has promised to raise tariffs on imports from “countries that have been ripping us off for years” to protect US car makers. He has also vowed to repeal Biden’s policies to drive EV adoption on his first day in office, saying EVs “do not work.”
“There is one issue on which most Democrats and Republicans agree is that [the US] should not let China dominate EVs or any other sectors,” said Robert McNally, founder and president of consulting firm Rapidan Energy Group in Washington. “That is something where there is broad bipartisan agreement, and I think you’ll see that reflected in even more intense policies” after Trump takes office, he added.
McNally was special assistant to the president on the National Economic Council during George W. Bush’s first term in the White House.
Chinese EV makers bore the brunt of Biden’s policies when he raised the tariff rate to 100 per cent from 25 per cent in August. The US blamed China for flooding its auto markets with state-subsidised EVs, part of a move to hit US$18 billion of Chinese exports including semiconductor chips.
Trump has pledged to halt funding from Democrats’ signature climate law, which includes tax credits and rebates to cut the US consumers’ costs of buying EVs. Instead, the incoming president has said he would boost domestic energy supply to bring petrol below US$2 a gallon, making EVs less attractive to Americans.
Elon Musk, Trump’s billionaire supporter and CEO of Tesla, may soften the blow or alleviate concerns about the potential backlash. The market rewarded that friendship by pushing Tesla’s stock up by 22 per cent on Thursday after Trump’s election win.
“Perhaps Musk would serve as a tempering positive mechanism on Trump,” said Gaurav Sharma, an independent energy market analyst based in London.
Share prices of BYD, Li Auto, and Nio traded 0.4 to 4.1 per ent lower on Monday. They fell by 1.4 to 3.5 per cent on Friday, after Beijing offered no extra fiscal stimulus to support the property and stock markets.
Chinese EV makers have at least three options, said Klisman Murati, founder and CEO of London-based consultancy Pareto Economics.
“It’s either to move your operation to the US to avoid paying these tariffs, take the hit with these tariffs, or find new markets for your production,” he said. “There is a fourth option, which is lobbying to have your products exempted from these tariffs, but not everyone will take that.”
Some leading Chinese EV makers are setting up production facilities in the European Union and Mexico and exploring opportunities in regions such as Africa and Southeast Asia. The EU last month increased tariffs on made-in-China EVs to as high as 45.3 per cent after a year-long anti-subsidy probe.
He Xiaopeng, co-founder and CEO of Xpeng, said on Wednesday that the premium EV maker plans to set up more production facilities in countries where it sells its cars to “contribute to local economies.”
Chinese-made EVs offer long driving range, slick digital features that enable drivers to operate home appliances and self-driving systems as they are described by Ford Motor CEO Jim Farley as “an existential threat” to America’s automotive industry.
The technologies used in Chinese cars are “unlike anything available in the United States,” Farley was quoted by the Wall Street Journal as saying in September.
Trump’s new policies could hinder the EV market growth in the US, some analysts said. Under Trump, EVs will garner 28 per cent share of the market by 2030, instead of 33 per cent, industry forecaster GlobalData amended its forecasts last week.
Nonetheless, the US is not a major market for Chinese EV exports, Gao Deng, an analyst at Guolian Securities, said in a report on Sunday.
China shipped about 10,000 passenger EVs to the US in 2023, less than 1 per cent of the country’s overall EV exports, Chinese customs data showed. In the first seven months of this year, China shipments to the US and Canada fell 10 per cent to 28,000 units, or only 2.4 per cent of total EV exports, according to data published by the China Passenger Car Association.
While the outlook is cloudy, the tariffs are unlikely to hold back Chinese EV makers from rolling out more competitive EVs, said Zhang Xiang, secretary general of the International Intelligent Vehicle Engineering Association.
Besides, Trump’s “pragmatic” approach to boost the domestic economy could also mean opportunities for Chinese EV makers, as they can negotiate to open factories in the US and create jobs, Xu Haidong, deputy chief engineer of the China Association of Automobile Manufacturers, told Chinese media.
Regardless, one thing is certain, Rapidan’s McNally said. “We can expect rough seas.”
Additional reporting by Daniel Ren in Shanghai
