US auto tariffs help Chinese EVs to race ahead

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These are tricky times to be a big automaker — though less so if you’re Chinese. President Donald Trump’s planned 25 per cent tariffs on imported cars and key auto parts are meant to force manufacturers to relocate production to the US and create jobs. European and Asian carmakers’ shares have dropped, but so have those of US carmakers, whose costs will rise. Shares of China’s BYD, however, now the world’s biggest maker of electric vehicles, rose on Thursday. The US tariffs may put western carmakers further behind BYD and its compatriots — by pushing their prices up just when Chinese firms are coming out with ever more affordable offerings and whizzy EV technology.

The tariffs come soon after what some analysts have called a “DeepSeek moment” — referring to China’s recent AI breakthrough — for the global auto industry. BYD last week announced a superfast EV charging system that it says can add about 470km of range in five minutes. By enabling drivers to charge up an electric car about as easily as filling up a petrol one this could remove a key deterrent to consumers going electric. Weeks earlier, BYD unveiled another techno-leap: a free, advanced self-driving system called God’s Eye that it plans to install across its range.

Grid capacity might yet restrain BYD’s plans for 4,000 fast-charging stations across China, and political and practical barriers could thwart ambitions to build such networks in other big markets. Foreign rivals may, in time, replicate its charging achievements. Yet BYD’s prowess shows the focal point of EV innovation is now China. Beijing’s state-led industrial policy has built a formidable manufacturing base and catalysed a striking shift in purchasing patterns. Pure battery and plug-in hybrid cars are expected to outsell internal combustion engine (ICE) cars in China in 2025, years ahead of western rivals.

All this is happening while the EU is proposing to relax emissions rules — a perhaps predictable response to European automakers’ failure to keep up with targets, but one that will slow EV momentum. US policy, meanwhile, has in effect been going into reverse on EVs. Trump wants to cut consumer tax incentives to go electric, and roll back clean technology subsidies in favour of his “drill, baby, drill” approach to oil.

US carmakers such as General Motors were still promising to invest revenues from higher ICE car sales into reducing EV prices. If tariffs go ahead as billed — though little is certain with Trump — they would in theory have an opportunity to use some of their excess capacity to boost domestic sales to replace imports. In practice, applying import levies to auto parts as well as whole vehicles will disrupt their supply chains, raise costs and force prices up — which may put US consumers off buying.

While most other big global carmakers rely on the US for a portion of their sales, the likes of BYD are already largely shut out of importing into the US, as well as Canada and the EU, by existing tariffs on Chinese EVs. But Chinese groups are being welcomed into emerging markets such as South Africa, Brazil, India and Turkey, helping China to overtake Japan in 2023 as the world’s largest car exporter. Many of those exports are ICE cars, but as demand develops, China has highly competitive EV models ready to go.

BYD’s arch-rival Tesla, whose cars are largely US-made, is among the best-positioned automakers to weather the tariffs. But even Tesla faces threats from BYD’s advances. And for western carmakers as a whole, US tariffs threaten to be a further brake on their transition to the clean technology that is the future of the industry — just when they should be applying the accelerator.