A senior government official has urged President Joe Biden to take steps and prevent cheap Chinese electric vehicles from proliferating the nascent American electric vehicle sector. Chinese EVs are significantly more affordable compared to similar offerings from Western carmakers, thanks to massive subsidies from Beijing.
Billions of dollars in government funding have allowed carmakers in China to sell their battery electric cars at much lower price points than their Western counterparts, giving them what many have termed an unfair advantage. European Union leaders have already launched a probe into the multitudes of cheap Chinese electric vehicles that have been flooding the European Union market in the past several months.
These leaders say that Beijing is lowering electric vehicle prices artificially and making it nigh-impossible for European automakers to compete in local markets. Senate Banking Committee chair Senator Sherrod Brown is of the same opinion. In what are the strongest remarks on the subject from a U.S. lawmaker so far, Brown said Chinese EVs pose an “existential threat” to America’s automotive industry.
The senator’s statement comes more than a month after the White House announced a U.S. investigation into Chinese vehicles to determine if the cars present a risk to national security. According to Brown, the U.S. government cannot allow China to export its “government-backed cheating” to the U.S. auto sector.
On average, battery electric cars are more expensive than gas and diesel-powered cars because many of their components are more expensive. By providing billions of dollars in subsidies to domestic carmakers, China has cut down production costs in its EV industry significantly and allowed its auto industry to develop and sell EVs relatively cheaply.
Since Western carmakers don’t have the same level of support from their governments, they simply cannot compete. In some cases, Western carmakers have lowered their prices to get their vehicles off their lots even if they operate at a loss. If Chinese EVs flood the American market, U.S. automakers will likely face an existential crisis.
President Biden noted in January that he wouldn’t allow Chinese EVs to enter the American market because they were potential national security risks. As per the White House, concerns that Chinese EVs contained technology capable of collecting sensitive data from U.S. drivers and their passengers could force Washington to institute restrictions on Chinese-made EVs.
After more than two decades of strategic planning and major investments, China is now the largest vehicle producer on the globe and is looking to wrestle the top exporter spot from Japan. However, a 27.5% tariff levied on Chinese cars has largely prevented their proliferation in the United States. U.S. Treasury secretary Janet Yellen also said during a recent trip to China that the Biden administration wouldn’t allow Chinese vehicle imports to flood the U.S. market.
Other makers of EVs that aren’t headquartered in the U.S. such as Cenntro Electric Group Ltd. (NASDAQ: CENN) will be observing how the dispute over China-made EVs plays out because it could ease some of the challenges that manufacturers face in breaking even amid such stiff competition.
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