China leads the charge in the electric vehicle competition
The global EV market is experiencing significant changes, with the US and EU increasing import duties on solar cells, semiconductors, lithium batteries, and EVs from China.
In a move aimed at supporting domestic industries, the US has raised its import duty on solar cells and semiconductors from 25% to 50%. This decision will impact the world's largest EV maker, BYD, who will now face additional tariffs of 17%-20%. Similarly, the US has raised its import duty on Chinese EVs from 25% to 100%, a steep increase that could potentially reshape the industry.
Meanwhile, the EU has imposed additional duties on Chinese EVs, with rates ranging from 17%-38%, depending on the manufacturer's compliance with an anti-subsidy investigation. European brands such as Mercedes and Renault, which export EVs made in China, will pay 21%. Companies deemed not to have cooperated, including Shanghai-based SAIC, will pay 38%.
These developments are prompting Chinese companies to invest heavily in local manufacturing and supply-chain capabilities in countries like Indonesia and Brazil. This strategic shift is aimed at reducing dependence on foreign markets and maintaining competitiveness.
The US import duty on critical minerals has also increased from zero to 25%. This move could potentially impact the global EV market, as these minerals are essential for the production of EV batteries.
Despite these challenges, China remains the world's biggest market for EVs, accounting for three-fifths of all units sold this year. In July 2022, retail sales of "new-energy" cars, which include electric vehicles (EVs) and hybrids, made up 51.1% of all car sales in China, a significant increase from 7% three years ago. Sales of conventional cars in China fell 26% in July 2022, while sales of "new-energy" cars increased by 37% year on year, reaching 878,000 units.
The growth in the EV market in China has been driven by years of government subsidies, tax breaks for both producers and consumers, and major strategic investment in technology and infrastructure. This investment is not only boosting the domestic EV market but is also seen as a geopolitical move to establish dominance in a high-end, high-status industry.
Looking ahead, the International Energy Agency predicts that global EV sales will grow to 20 million in 2025 and then double to 40 million by 2030, accounting for 30% of all car sales by that point. As the EV market continues to evolve, it will be interesting to see how these changes in import duties and manufacturing strategies will shape the global landscape.
