US prepares to block China’s EVs
Biden administration raises ‘national security’ barrier to Chinese electric car imports
The Biden administration, fearing a potential surge of cheap imports of Chinese electric vehicles, has opened an investigation into “smart car” technology that US officials claim could be used to spy on Americans, or sabotage the US economy.
President Joe Biden on February 29 directed the Department of Commerce to open an investigation into whether Chinese-made vehicles pose a risk to US national security
“China is determined to dominate the future of the auto market, including by using unfair practices,” Biden said in a statement released by the White House.
“China’s policies could flood our market with its vehicles, posing risks to our national security. I’m not going to let that happen on my watch,” Biden said.
While the Biden administration cited security as the official pretext for the investigation of Chinese EVs, the president was clear about his intent to protect the domestic US auto industry which has stalled in its planned transition away from internal combustion engines.
“As President I vowed to do right by auto workers and middle-class families that depend on the auto industry for jobs,” Biden’s statement said.
“With this and other actions, we’re going to make sure the future of the auto industry will be made here in America with American workers.”
The United Auto Workers, a labor union with nearly a million active and retired members, is backing Biden in his re-election bid in November after the president supported the UAW in its 2023 strike against the big three US automakers.
Commerce Secretary Gina Raimondo on Thursday insisted that, while there are trade overtones to the administration’s move, it is motivated by real national security concerns rather than economic protectionism.
“Cars these days are you know, it's like an iPhone on wheels. You get in your car; you connect your phone. You might receive a text message from your family, from your doctor. The car knows your location, it knows your patterns, everywhere you're going, your routes. It’s a huge amount of information. It collects some biometric information,” Raimondo said in a February 29 interview on MSNBC.
US officials fear data could be collected on millions of Americans and sent back to Beijing. Further, Chinese-made vehicles could be made inoperable en masse by remote switch.
“That's a scary place to be,” Raimondo said. “Imagine a world where there's three million Chinese vehicles on the road in America and Beijing could turn them all off at the same time.”
EVs accounted for 24 percent of new car sales in China during 2023, double the 12 percent of new cars sold in 2021, according to data from the China Passenger Car Association. China is fast becoming the world’s largest EV auto exporter. Chinese EVs are being offered at prices 15 percent to 20 percent cheaper than American vehicles.
At present, vehicles made in China and imported to the US are subject to a 25 percent tariff imposed by former President Donald Trump.
The Trump-era tariffs on China have been under review by the Biden administration which is considering raising tariffs on Chinese EVs while lowering costs on other products not considered strategic, according to reports.
“The president may decide that he also is interested in tariffs on Chinese electric vehicles,” Raimondo said. “He is deadly serious about leveling the playing field to protect American workers.”
“The Chinese government has poured huge subsidies into the car industry to dominate the global market,” Raimondo said.
China’s EV strategy has been to develop cheap access to lithium and other critical materials and use its domestic market to build capacity and economies of scale. It is now targeting export markets. In the past three years, Chinese EV models have claimed more than 8 percent of the European market but are not yet sold in meaningful numbers in the US.
Chinese automaker BYD Co Ltd sold 3 million cars in China’s domestic market last year and about 250,000 outside of China, according to Bill Russo, founder and CEO of Automobility, a consultancy based in Shanghai.
BYD makes six of the top 10 best-selling models in China. Leveraging a vertically integrated supply chain, the company is now going global with “tremendous upside” and “pricing advantage,” Russo said.
He warns against the US using tariffs and other trade barriers to slow or prohibit China’s entry to global markets. “All you're really doing is adding cost to the American consumer,” Russo told Bloomberg in a January interview.
The Commerce Department, which has become a hub within the US government for implementing trade policy on artificial intelligence and advanced semiconductors, will conduct a 60-day review of the so-called “smart car” risks, Raimondo said.
“We could do everything from mitigating, all the way to banning or maybe saying a Chinese car could be sold here only if it has either American or European -- you know, allied -- software and data collection and sensors,” she said.
Raimondo said she raised these concerns with Chinese officials when she visited Beijing last year and said the US is looking for reciprocity. Since 2019, China has restricted where Tesla vehicles can operate, banning them from military bases.
The Commerce Department Bureau of Industry and Security notice of proposed rulemaking defining “undue or unacceptable risks” of connected cars can be found here.
— William Roberts