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One thing Biden and Trump agree on: Keeping this $10,000 Chinese EV out of the U.S.

One thing Biden and Trump agree on: Keeping this $10,000 Chinese EV out of the U.S.

While they’re still not available in the U.S., Chinese electric vehicles have nonetheless been a hot topic here this year, in corporate boardrooms as well as on the presidential campaign trail.

Elon Musk, CEO of U.S.-based EV pioneer Tesla warned in January that without trade barriers, Chinese automakers would “demolish” rivals. A month later, Carlos Tavares, CEO of Chrysler and Jeep parent Stellantis said the “Chinese offensive is possibly the biggest risk that companies like Tesla and ourselves are facing,” comparing it to when Japanese and later Korean car manufacturers first entered the U.S. market decades ago.

President Joe Biden, the first commander in chief to walk a picket line with striking American autoworkers, has made an effort to put the brakes on Chinese entries into the U.S. car market. His administration has been considering raising tariffs on Chinese EVs —which already would be subject to a total tariff of 27.5% should they be become available in the U.S. and which would not be eligible for a popular $7,500 EV tax credit.

Biden also has ordered an investigation into the national-security risks posed by Chinese EVs that feature sophisticated technology that tracks drivers.

The president’s fellow Democrats have taken tough stances as well, with Michigan Sens. Gary Peters and Debbie Stabenow, along with Ohio Sen. Sherrod Brown, urging the Biden administration last fall to “maintain or increase” the tariffs on Chinese EVs. Brown last Friday said the U.S. “must ban Chinese-made EVs as soon as possible.”

Presumptive 2024 Republican nominee Donald Trump has called for a 100% tariff on Chinese EVs while warning about Chinese car manufacturing in Mexico. The former president’s proposal, floated last month in a speech warning about a possible “bloodbath” for the U.S. car industry, came after Republican Sen. Josh Hawley of Missouri called for total tariffs of 125% on Chinese EVs in February, and after GOP Sen. Marco Rubio of Florida backed a flat $20,000 tariff on all Chinese vehicles.

But while executives and politicians express concerns about the threat to U.S. brands, what’s the likelihood U.S. consumers would buy Chinese EVs if they were available here?

The Yuan Up, an electric sport-utility vehicle from BYD that has a price tag around $14,000, “would sell like hotcakes in the U.S.,” according to a recent article on automotive news and opinion website Jalopnik. “Give it a few years on the market, for the initial shock of ‘Chinese automaker’ to wear off, and this little BYD would do numbers in no time,” the article said.

Others aren’t so bullish.

In a recent survey, 22% of Americans said they would buy a Chinese EV over one from a name-brand U.S. company, in a scenario where the cars had identical features but the Chinese-made one cost $5,000 less. That represents a significant chunk of the car-buying public, but it’s still much smaller than the 78% share of survey respondents who said they’d buy the pricier American vehicle. There wasn’t much variation by political party, age, race or gender.

That result “offers some of the first evidence that Americans — who have long told pollsters that they want to buy U.S.-made products, but that they won’t pay extra for them — may be changing their views and buying habits in light of geopolitics,” said climate news website Heatmap, which released the survey last year.

Chinese car companies likely would have to be patient in any quest to win over U.S. buyers, according to Jessica Caldwell, head of insights at Edmunds.

“If you do have a quality product that is priced very attractively, it will definitely help speed that process along, but it’s also people not knowing who you are, what your quality is like, what you stand for,” Caldwell told MarketWatch. “All of those things take a lot of time to build, because it’s not like we’re asking people to buy something that is inconsequential.”

An Edmunds survey last month found that 90% of 18- to 24-year-olds said they’re open to an EV as their next purchase, and that 83% of 24- to 34-year-olds said the same. Because younger buyers tend to be more sensitive to prices, might they go for BYD’s Seagull EV, which just started selling for under $10,000 in China?

“If Chinese automakers were to come to the U.S. with cheaper EVs, I think younger buyers would definitely be more open to the idea,” Caldwell said. “But I would imagine that their parents and family members would probably have a lot to say that may dissuade them.” She noted that “a lot of car buying is just, you buy the same thing that your family owned.”

“I don’t think companies like BYD are on the radar of most American consumers,” she said. “I don’t think the average person probably is following along and knows exactly what a BYD Seagull is.”

On the other hand, veteran automotive journalist John McElroy recently said of the BYD Seagull: “Everybody in the industry is talking about this car because it’s so inexpensive.” His comments came in a video in which he checked out the EV. Later in the video (below), he said: “I could live with this car, no question. I mean not for performance driving or long trips or anything like that, but running to the hardware store or something like that.”

As MarketWatch’s Claudia Assis has noted, BYD also is going after the high-end market with a $233,000 electric “supercar.” It’s an effort to broaden the company’s appeal and show financial confidence, as well as to avoid becoming known only for low-end cars. BYD, which is 8% owned by Warren Buffett’s Berkshire Hathaway overtook Tesla last year to become the world’s biggest EV maker.

The Chinese juggernaut has said it’s looking for a factory location in Mexico but that it’s not planning to export to the U.S., but rather will focus on the Mexican market. Even so, the proposal from Hawley, the Republican senator, specifically calls for much higher tariffs on all cars manufactured by Chinese companies, regardless of where they are made, so that companies “cannot use other nations, such as Mexico, as a backdoor.”

Another Chinese EV company, Nio has said it’s considering entering the U.S. market as soon as next year.

China already has a foothold in the U.S. car market through brands such as Sweden-based Volvo which is majority owned by Chinese automotive giant Geely, as well as Polestar a Volvo unit that sells luxury EVs in the U.S. In addition, China has a dominant role in the mineral supply chain for EVs, and Ford’s Lincoln Nautilus SUV and GM’s Buick Envision SUV are also both made in China and sold in the U.S.

What’s coming from Biden and Trump

Raymond James analysts said last week that there’s a strong possibility of higher tariffs on Chinese EVs as a result of the Biden administration’s long-awaited review of Section 301 duties, which are named after a part of the Trade Act of 1974.

U.S. Trade Representative Katherine Tai is slated to testify before House lawmakers on Tuesday and before U.S. senators on Wednesday, and those Capitol Hill hearings could offer a “potential first window for the release of the new tariffs,” the analysts, led by Ed Mills, said in a note.

“If Biden wins re-election in November, we would expect to continue to see targeted tech and trade restrictions on Chinese EVs — and potential retaliation from China,” the Raymond James team added.

“If President Trump retakes control of the White House, we would expect any new tariffs to capture a broader range of Chinese imports and to be set at more aggressive rates,” they said.

A 100% tariff on Chinese EVs is “very unlikely,” said Mary Lovely, a fellow at the Peterson Institute for International Economics, a think tank. “That’s all for political show.”

The key question, according to Lovely, is how much of a cost advantage Chinese automakers have and what level of tariff would be prohibitive — that is, high enough that no one would want to buy their cars. She said she would expect both Biden and Trump to address any serious competitive challenge from Chinese EVs with higher tariffs, but that with a second Trump term, the moves would be “much deeper than just EVs.” Trump has talked about a 60% tariff on all Chinese imports as well as a 10% levy on all imports.

“This is an enormous threat to the stability of global value chains,” Lovely told MarketWatch.

There are economic and national-security reasons proffered for U.S. opposition to Chinese EVs, with Brown, the Democratic senator, saying last week that China “illegally subsidizes its companies, putting our workers out of jobs and undermining entire industries.” Brown, who is running for re-election against Trump-backed GOP challenger Bernie Moreno, also said the sensors, cameras and other technology in Chinese EVs can collect “information about traffic patterns, critical infrastructure or the lives of Americans,” and that Beijing should not have access to that data.