In a surprising move sure to leave many eyebrows raised, Tesla CEO Elon Musk has announced that he opposes the recent tariffs levied on the Chinese electric vehicles by President Joe Biden’s administration. While speaking to a Paris technology conference via video, the controversial billionaire said neither he nor Tesla asked for the Chinese EV tariffs, which were passed only a few days before the conference.
The new rates will see Chinese car makers pay 100% tariffs for every electric vehicle that enters American ports, essentially making it impossible for companies such as BYD, XPeng and Nio to sell their cars in America at their original rates. These new tariffs are part of a package of Biden-administration measures designed to support local production and protect American manufacturers from more affordable Chinese imports.
Musk had previously noted that electric vehicle imports from China had the potential to “demolish” their competition if trade barriers weren’t put in place. Thanks to billions of dollars in government subsidies and a robust supply chain for EV raw materials, electric vehicle production costs in China are among the lowest in the world. As a result, Chinese automakers can sell their cars at much lower price levels compared to most Western automakers, giving them a significant edge in an increasingly competitive market.
While the United States still has a scant number of Chinese EVs on its roads, the European Union is already reeling from an influx of such vehicles. EU leaders have already launched an investigation into electric cars developed in China. Even so, Musk says that he was surprised when he learned of the new tariffs and argued that policies which “distort the market” or “inhibit the freedom of exchange” aren’t good. He added that as Tesla still competes in China where there are no tariffs levied on Chinese EVs, he is in favor of a tariff-free market.
Musk’s comments belie the fact that Tesla has been extremely pressured in the Chinese EV market and has even embarked on a price-discount war to remain competitive. Furthermore, established automakers such as Ford and GM, which still haven’t gained a foothold in any major market, would not be able to compete with cheap electric vehicle imports from China.
General Motors is reportedly losing up to a hundred thousand dollars on each EV it sells after it cut prices. The entry of more affordable Chinese EVs would likely be the final nail on these carmakers’ dreams for electrification. Unsurprisingly, Beijing has also stated its opposition to the recent tariffs on Chinese products and vowed to retaliate.
It remains to be seen how other automakers such as Rivian Automotive Inc. (NASDAQ: RIVN) view these newly announced tariffs on EVs sourced from China.
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