Summary
- The EV sector is projected to generate up to US$10 billion annually by 2028
- China dominates the EV sector, with nearly 60% of new electric car registrations in 2023
- The US and EU are implementing tariffs and trade barriers to protect their domestic EV markets
- Manufacturers worldwide are strategizing to protect their market shares amidst trade wars
- The introduction of EV tariffs by the US and EU has brought attention to the price gaps between domestic and Chinese-built EVs
Article
The electric vehicle (EV) sector is experiencing rapid growth, with projections suggesting it could generate up to US$10 billion annually by 2028. Government subsidies and incentives have fueled a relative boom in EV manufacturing, leading to a 2020s gold rush as economic superpowers vie for a share of the market. China currently dominates the sector, accounting for nearly 60% of all new electric car registrations globally in 2023 and surpassing Tesla as the world’s biggest producer through companies like BYD.
As the US and Europe aim to protect their domestic industries from China’s market dominance, tensions and fears of a global trade war have emerged. Measures such as tariffs, taxes, and quotas are being implemented to safeguard domestic production from what is perceived as unfair competition. However, concerns have been raised about the wisdom of stifling international trade, with US policymakers and the EU enacting tariffs to restrict Chinese imports and protect their own market shares.
In response to trade barriers, manufacturers are strategizing to maintain their market shares. BYD is exploring production sites in Turkey despite a 40% tariff on Chinese-built EV imports, while Geely plans to shift production of certain models to sites in the US and South Korea. Mexico, as the world’s seventh-largest passenger vehicle manufacturer, has also become a focus for production facilities. These moves reflect a broader trend of manufacturers seeking to navigate the evolving trade landscape and protect their interests.
However, some industry leaders, like BMW’s CEO Oliver Zipse, believe that tariffs are a “dead end” that will not strengthen European manufacturers’ competitiveness. German automakers Volkswagen and Mercedes-Benz, which produce in China at scale, fear retaliation with counter-tariffs if the EU implements restrictions on Chinese EV producers. Concerns have also been raised about the impact of tariffs on price gaps between domestically produced and imported vehicles.
Ultimately, the success of the EV market will depend on consumer demand and the availability of affordable options. While some believe that Chinese-built cars may still enter European markets at lower prices, highlighting the cost advantage of Asian production, the introduction of tariffs by the US and EU has emphasized the importance of price competitiveness. For EVs to meet climate goals and corporate targets, they must be priced in a way that appeals to buyers and encourages widespread adoption.
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