Cheap EV’s
A Tax by Any Other Name Still Makes Stuff More Expensive
Tariff /terǝf/ noun: a tax or duty to be paid on a particular class of imports or exports.
There is a bad plan working its way through western governments right now. It began with the U.S. back in May 2024. That’s when the Biden administration announced that it quadrupled electric vehicle (EV) tariffs on Chinese imports to 100%.
That’s not a typo. We now tax imported Chinese EVs enough to effectively double their price. And the U.S. isn’t alone.
The European Union (EU) announced that it will significantly increase the current 10% tax on Chinese electric vehicles (EVs). These taxes, called tariffs, increase the price of these EVs to deter people from buying them.
According to Bloomberg, the EU will add as much as 48% to the cost of Chinese EVs. The new tax will kick in this July. It’s effectively government interference in the market. And it’s an unnecessary tax that harms the industry. From the article:
“The EU ignored the facts and WTO rules, ignored repeated strong objections from China, and ignored the appeals and dissuasions of many EU member states’ governments and industries,” China’s Ministry of Commerce said in a statement. Beijing will “take all necessary measures to firmly safeguard the legitimate rights and interests of Chinese companies.”
One EU country, Norway, refused to follow the EU’s lead. Finance Minister Trygve Slagsvold Vedum told Bloomberg:
“Introducing tariffs on Chinese cars is neither relevant nor desirable for this government.”
It’s refreshing to see at least one government with sensible members. Norway leads the world in EVs. A whopping 24% of the cars on the road are electric. According to Statistics Norway, there were 689,169 electric cars registered in Norway. This new tariff could inhibit other EU countries from following Norway’s lead.
As usual with this kind of legislation, there are significant unintended consequences. Several non-Chinese automakers import their EVs from China:
In addition, several Chinese companies plan to open manufacturing plants in Europe. According to Reuters, BYD and Chery will build plants in Hungary and Spain, respectively. That could pull an end-run around the tariffs.
This is one of the most glaring examples of government over-reach into an emerging market. The politicians would rather make imported goods more expensive (and reap a tax windfall) than boost domestic manufacturing.
That way they don’t have to announce increased spending. However, it becomes a tax increase on anyone in the market for a new EV. And it does nothing for the nascent EV manufacturers within the EU and the U.S.
A better plan would be to support and subsidize these industries to make their goods less expensive to consumers. That would help them compete with the Chinese imports and make these vehicles more affordable to potential buyers.
For the Good,
The Mangrove Investor Team
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50%
1.6 Million
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