Cheap Chinese EVs Could Put US Automakers in a Bind

Cheap electric cars manufactured in China could make it difficult for U.S. carmakers to compete in markets outside the United States. Thanks to the 27.5% tariff levied on Chinese electric cars when they enter U.S. ports, China’s quickly expanding electric-vehicle industry has been unable to expand into the U.S. market.

However, while U.S. lawmakers have mostly kept Chinese electric vehicles from proliferating in the country, other major markets, specifically Europe, are seeing a major onslaught of electric cars manufactured in China. As Beijing has spent most of the past decade investing tens of billions of dollars’ worth of subsidies into its nascent EV industry, Chinese automakers can cut their production costs significantly and sell their electrified offerings at much lower prices compared to Western carmakers.

As a result, Chinese electric cars tend to be cheaper than EVs made in the west, with similar and sometimes superior quality technology, making them incredibly attractive to customers without lots of disposable income. For example, aspiring electric-vehicle owner Arvind Srinivasan is looking for an electric vehicle that costs less than $25,000. He says he would buy a Chinese EV due to their low cost, but his patriotic leanings push him toward supporting the tariff on Chinese cars or even banning them outright.

Although their affordability makes them popular among consumers, Chinese electric cars pose an existential threat to the U.S. auto industry and could potentially cost the country countless jobs while hampering the development of a domestic green-energy ecosystem. Additionally, with tensions between the U.S. and China are not showing signs of subsiding any time soon, the prospect of higher tariffs or even bans isn’t unfounded. But while Chinese electric vehicle companies have had little success in the U.S., they have seen major success in European markets and are already pressuring local carmakers, thanks to their low prices.

Srinivasan eventually settled on a Chevy Bolt that cost him $23,500 with a tax credit. He isn’t particularly impressed with the car but says it will have to do because it was the only option in his price range. Srinivasan says that although he’s not a big fan of large auto companies, Chinese automakers could swoop in and undercut America’s auto sector if the U.S. doesn’t support the largest players in the sector.

No American carmaker is selling an affordable electric car, and Kelley Blue Book puts the average price of electric cars in America at around $54,000, placing them out of the financial reach of most mainstream buyers.

China may be unable to enter the American auto market, but other automakers outside the country are scrambling to develop an affordable EV. These companies could achieve this before carmakers in the U.S. do. Once a cheap EV that isn’t subject to the same tariffs levied on Chinese cars hits the U.S. market, local automakers could be locked out of the EV market while it’s still in its infancy.

The onus is now upon U.S. manufacturers such as Lucid Motors (NASDAQ: LCID) to come up with mass-market versions of electric vehicles so that foreign companies don’t pull out the rug from under them in this sector.

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