Amid concerns over the alleged threat posed by cheap Chinese electric vehicles (EV), the U.S. government announced on Tuesday a significant tariff hike on Chinese EVs, rising from 25 percent to 100 percent in 2024.

With the automobile industry’s electrification progressing at a snail’s pace, U.S. authorities are hoping to protect the domestic electric vehicle industry by blocking Chinese EVs.

However, industry insiders and experts argue that imposing tariffs will not accelerate the development of the U.S. EV industry, as the barriers to its progress stem from internal challenges rather than external factors. Instead, these new protectionist measures would eliminate the much-needed competition for American car manufacturers and impede a green transition in the United States.

Furthermore, the newly imposed tariff will increase costs for U.S. consumers, who will be deprived of access to affordable Chinese EVs. This may hinder their ability to transition to more environmentally friendly vehicles, consequently impacting the U.S. targets for mitigating climate change.

“Such imposts aren’t just a barrier on the road to net zero: they’re also a willful act of economic self-harm,” said Bloomberg columnist David Fickling in a recent opinion piece.

STALLING ENERGY TRANSITION

After coming into office in 2021, the Biden administration had set an ambitious goal of achieving a carbon pollution-free power sector by 2035 and a net zero emissions economy by no later than 2050. The focus was on promoting EVs and EV battery production. For this purpose, the Biden administration has issued supporting measures, such as building charging stations and retraining workers.

On April 27, 2023, the U.S. Environmental Protection Agency (EPA) published proposed standards to further reduce harmful air pollutant emissions from light-duty and medium-duty vehicles starting with model year 2027. It projects that EVs could account for 67 percent of new light-duty vehicle sales and 46 percent of new medium-duty vehicle sales in 2032.

Nevertheless, according to Kelley Blue Book estimates, the EV share of the total U.S. new-vehicle market was only 7.6 percent in 2023, up from 5.9 percent in 2022 and 3.2 percent in 2021. Analysts of Cox Automotive expect EV share to increase year over year in 2024 to reach roughly 10 percent. The growth is far from meeting the EPA targets.

On March 20, 2024, the EPA issued its final automobile emissions standards, allowing the automotive sector more time to ramp up production for electric vehicles and other alternative fuel powertrains in the latter half of the decade than it would have under the previous proposal.

The final rules clarify that multiple pathways can be used to achieve compliance. EPA expects the mix of EVs, plug-in hybrids, hybrid electric vehicles and cleaner internal combustion engine vehicles to increase. It projects that from model years 2030 to 2032, manufacturers may choose to produce all-electric vehicles for about 30 percent to 56 percent of new light-duty vehicle sales.

Under the final rules, the total light-duty fleet standard for model year 2029 is 136 grams of carbon dioxide per mile, a nearly 50-percent decrease from model year 2026 and against the original proposal for the 2029 target of 111 grams per mile.

The broad return to a more mixed vehicle offering still assumes an all-electric future, but adoption is much slower than previously expected. The buzz around EVs is wearing off.

GROWING MISMATCH BETWEEN SUPPLY & DEMAND

U.S. EV sales in 2023 crossed the one-million-unit mark for the first time and increased about 52 percent compared with 2022. Despite the growth, only one in 10 new car registrations in the United States was electric in 2023, against more than one in three in China and over one in five in Europe.

There are about 3.3 million EVs on the road in the United States, according to an Experian Automotive Market Trends report from the fourth quarter of 2023, up from 2 million in 2022 and 1.3 million in 2021. However, overall, EVs account for just over one percent of the total light-duty vehicles currently on U.S. roads. There is still a long way to go before EVs catch up with gas-powered vehicles, which comprise the remaining 285 million vehicles currently operating.

Except for Tesla, all other U.S. automakers have seen disappointing EV sales. Ford Motor Co. used to pin great hope on the F-150 Lightning, an all-electric version of America’s favorite F-150 pickup, but the sales have fallen significantly short of the company’s projection.

Due to slowing demand for EVs, General Motors and Ford have postponed billions of dollars in investments in the past year as the two automakers have moved against additional production capacity. Tesla is also cutting prices. Apple has canceled all plans to release an autonomous electric vehicle, which it had been working on for over a decade at a cost of billions of dollars.

On the supply side, the average price paid for an EV in February was 52,314 dollars. Though higher inventory and increased competition have driven down the price premium of EVs, they remain priced above mainstream non-luxury vehicles by nearly 19 percent, according to Cox Automotive and Kelley Blue Book estimates.

With fewer EVs qualifying for tax incentives, EV sales may further stagnate.

Producing EVs is not cost-effective for U.S. automakers. With China taking the lead in the new energy industry, particularly the battery sector, many clean vehicle companies worldwide use China-made batteries. However, Tu Xinquan, dean of the China Institute for WTO Studies of the University of International Business and Economics in Beijing, told Xinhua that the U.S. government has forced enterprises to redirect their supply chains.

According to a newly published analysis from the Boston Consulting Group (BCG), legacy automakers are still losing thousands of dollars on EV sales. The group estimates that most automakers lose around 6,000 dollars on each EV they effectively sell for 50,000 dollars, and that price accounts for any tax credits or other consumer incentives.

Automakers will only be able to close about half of that cost gap with technology choices, BCG said.

On the demand side, America is a country on wheels, and its consumers generally prefer large vehicles, have range anxiety for EVs and are not ready to replace their orthodox cars with EVs.

Compared to Europe and Asia, America has vast land, abundant resources, and cheap fuel. The advantages of EVs are not particularly obvious here, Ni Pin, president of Wanxiang America Corporation, told Xinhua.

Meanwhile, America also lags in building charging stations. About 80 percent of respondents cited concerns about a lack of charging stations as a reason not to buy an electric vehicle, according to a 2023 survey from The Associated Press-NORC Center for Public Affairs Research and the Energy Policy Institute at the University of Chicago. Seven in 10 said they would not buy an EV because it takes too long to charge and the battery technology is lacking.

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Areas of Focus: Public Opinion on Energy & Climate
Definition
Public Opinion on Energy & Climate
How important is fighting climate change to the American public? An annual poll released with The Associated Press-NORC Center for Public Affairs Research gives insight.