Chinese Electric Vehicles Could Subdue US Market If EPA Proposal Continues

Industry experts warn that expanding EV mandates could strengthen Chinese industry

Wang Chuanfu, chairman and president of BYD Auto, the biggest global electric brand by sales volume, prepares to show the latest cars during the Auto Shanghai 2019 show in Shanghai on April 16, 2019. Ng Han Guan/AP

While China’s electric vehicle (EV) manufacturers have had a tough time breaking into the U.S. market, this could soon change as the U.S. Environmental Protection Agency’s (EPA) push for EVs could end up benefiting Beijing.

As the domestic market becomes increasingly saturated, Chinese EV manufacturers are looking to boost their exports abroad, with the United States being a major prospective market. The United States has been a tough nut to crack due to a 27.5 tariff percent imposed during the Trump administration which makes Chinese vehicles more expensive. In addition, the current EV tax incentives are only available for U.S.-manufactured vehicles.

However, the EPA’s proposal to increase EV presence in the country presents China with an opportunity to rapidly expand in the U.S. market.

The agency’s proposal requires 37 percent of new light-duty cars and trucks to be electric battery vehicles by 2027—a number that rises to 60 percent plus by 2030.

In a July 12 blog post at the Alliance for Automotive Innovation CEO John Bozzella warned that if U.S. policymakers and regulators move fast on EV mandates in the coming years, China will gain a “stronger foothold in America’s EV battery supply chain and eventually our automotive market.”

He pointed out that battery electric vehicles (BEV) only accounted for six percent of vehicle sales in 2022. If the EPA “gets its way” and a fivefold jump in BEV is necessary in four years and a tenfold jump in six years, it would require massive quantities of minerals, a situation that considerably favors Beijing.

“China is expected to produce almost 90 percent of the anode active material and 80 percent of the cathode active material in 2030,” which are the two leading components in an EV battery, Mr. Bozzella pointed out.

As such, EPA’s EV targets would mean that China and Chinese-backed mineral companies in countries like Congo, Chile, and Indonesia will become critical to fulfilling the agency’s goal.

“They’ll supply the minerals and processing needed to produce the batteries … needed to build the vehicles … needed to comply with EPA’s regulation. In other words, official U.S. policy will have thrown open the doors (and the ports, as it were) to China,” he said.

“Before long, Chinese automakers will accelerate their entrance into the American market with low-priced EVs that meet the aggressive (and arbitrary) EPA requirements for model years 2027-2032.”

“If the U.S. moves too slow on electrification, we’ve got a China risk too. Failure to scale up and move with sufficient urgency gives China the running room to lock up global EV supply chains and expand into other global auto markets,” Mr. Bozzella stated.

“This is our Goldilocks problem. Too fast: advantage China. Too slow: advantage China.”

Lobbying For Market Access

Chinese EV companies are already hiring lobbyists to sway U.S. lawmakers in their favor.

For instance, Shanghai-based electric vehicle manufacturer NIO has tapped two lobbyists to push its interests in the United States.

According to the company’s disclosure form, the lobbyists will focus on issues that promote and encourage the sale and development of NIO electric vehicles in the country.

Such issues are “tax incentives; tariffs and trade restrictions that could impact NIOs business operations in the United States; issues associated with the use of those vehicles, including safety and data privacy.”

In a July 2 post, Fitch Ratings said that they expect China’s EV export momentum to continue due to the global electrification trend, China’s edge in the EV supply chain, and a supportive government policy.

The firm expects “more global automakers to take advantage of China’s cost-competitive EV supply chain and assemble and export vehicles from China, similar to Tesla China’s operations.”

However, Fitch Ratings also said that China’s EV exports may get hit if other nations push back against these firms in a bid to protect local industries and build their own EV supply chains.

Dependent On China

In a Jan. 28 commentary at The Epoch Times, Anders Corr, a principal at Corr Analytics Inc., warned that China’s electric vehicles could “destroy America.”

If EV makers outsource production to China from the U.S., Europe, South Korea, Japan, and other allied nations, “they will pay in the long run” once China monopolizes the supply chain, he states.

For instance, Beijing could use the monopoly to pressure the United States by blocking the shipments of vehicle batteries.

The Chinese regime has previously used a similar tactic before. Back in 2010, it stopped the shipment of critical rare earth elements to Japan.

Moreover, as EV engines are simpler than diesel or gas engines, switching to electric vehicles would mean handing the advantage to China, Mr. Corrs observed. “Gone will be the comparative advantage that higher-skilled engineers and workers in market democracies had.”

During an April 20 House subcommittee hearing on the Department of Transportation’s proposed 2024 budget, Rep. Ryan Zinke (R-Mont.) pointed to a 2017 report on climate change and another report on critical materials which “clearly” stated that the United States is “becoming dependent on China.”

“Unless we change the rudder, we will be more dependent. And unless we figure out the supply chain first, our pursuit of EV makes us more dependent on China.”

The Epoch Times has reached out to the EPA for comment.