As Chinese automakers expand their foothold in the electric vehicle industry, a U.S. trade group is urging lawmakers to block their importation into the United States.
Related: BYD's new supercar is looking to leave Ferrari and Lamborghini in the dust
A recent report by the Alliance for American Manufacturing titled “On a Collision Course: China’s Existential Threat to America’s Auto Industry and its Route Through Mexico," warns that these inexpensive cars can change the dynamics of the U.S. car industry and threaten the viability of American automakers.
"The introduction of cheap Chinese autos — which are so inexpensive because they are backed with the power and funding of the Chinese government — to the American market could end up being an extinction-level event for the U.S. auto sector," the group said.
Under a list named "Policy Recommendations," the alliance urged lawmakers to consider eleven legislative moves to combat what they feel is unfair trade practices by Chinese firms, including imposing "exclusionary tariffs on all Chinese automobile imports to the United States," and excluding" automobiles and component parts manufactured by companies headquartered in a non-market economy, such as China, from gaining any preferential treatment under USMCA, GSP, and any other trade agreement."
In the report, the Alliance states that Chinese automakers and parts suppliers operate at an unfair advantage over American counterparts, noting that these companies receive diverse and far reaching nodes of support from the local government, which in turn enable these prices to be possible.
"Thanks to the Chinese Communist Party’s (CCP) industrial planning and generous assistance that began in the wake of the 2009 financial crisis, its state-owned and state-supported manufacturers are poised to dominate the burgeoning global EV market," the Alliance said. "China is estimated to have spent tens of billions of dollars to create an auto sector ready to take advantage of the clean energy shift, with support including tax breaks, favorable lines of credit, land use agreements, extremely limited import competition, and often direct subsidization."
Because of this, the alliance warns that Chinese investment into plants in Mexico should be particularly worrying because of the circumstances it will create for companies like BYD. Under current legislation, cars made in China are subject to a an additional 25% tariff on top of a 2.5% tariff on imported cars, but assembling said cars in Mexico can make things different.
“More alarming, however, are Chinese firms’ heavy spending on plants in Mexico, through which they can access the United States by way of the more favorable tariffs under the United States-Mexico-Canada Agreement (USMCA). This strategy is, in effect, an effort to gain backdoor access to American consumers by circumventing existing policies that are keeping China’s autos out of the U.S. market."
More Automotive:
- BMW exec says it's the end of the line for a popular option among car enthusiasts
- Mercedes just took a subtle dig at its biggest luxury rival
- Ford is taking away a convenient feature because no one uses it
The report comes as Tesla (TSLA) rival BYD (BYDDY) plans to establish an EV factory in Mexico. The automaker — which has just unveiled a six-figure supercar — told Japan's Nikkei that it seeks to use the factory as an export hub to the United States.
In November 2023, a bipartisan group of lawmakers implored U.S. Trade Representative Katherine Tai to increase the current tariff on Chinese-made cars and also said that her office "must also be prepared to address the coming wave of (Chinese) vehicles that will be exported from our other trading partners, such as Mexico, as (Chinese) automakers look to strategically establish operations outside of (China)."
Related: Veteran fund manager picks favorite stocks for 2024
