China EV makers are calling foul because their cars carry far higher tariffs than Telsa’s cars, which were also built in China. The aggressive moves against Chinese technology dominance originated mainly from the US using the country's diplomatic powers. Still, with the US cutting foreign aid dramatically and seemingly falling into disfavor with Europe, the EU will likely agree that Tesla is unfairly favored, particularly if China ups its aid into the region.
China is already leading Tesla in cost and technology, and Tesla essentially leads the rest of the world in EV sales and focus. BYD, in particular, has fielded cars that are significantly better and cheaper than comparable Tesla cars, so if the tariffs are eliminated or equalized, Tesla could be subordinated to BYD, as it is already in Australia.
The Beginning Of The End For Tesla
Tesla was massively helped by EV incentives because, for a long time, it was the only EV maker at scale, as other car companies failed to realize or respond to Tesla’s massive popularity and valuation. However, that popularity has been falling like a rock lately, and the political leaders there aren’t happy with him at the moment.
This is not a good situation when you have a manufactured advantage, such as heavier tariffs, against your growing Chinese competition. Losing that advantage should be catastrophic for Tesla sales, given that Chinese EVs are generally significantly less expensive when no Tariffs are uplifting their pricing.
Even before this anticipated Tariff action, Teslas was losing ground in Europe with sliding sales even with their Tariff advantage, so losing it could be catastrophic. And this is on top of the general trend of people not wanting to do business with a Musk company.
What Happens If Tesla Loses Its Tariff Advantage?
I’m not a fan of Tariffs being used for anything other than to offset government-driven predatory pricing (where a government subsidizes an industry to create artificially low prices to take that industry over). The cost advantages the Chinese car makers have are largely due to massive investments in manufacturing technology and in gaining near absolute control of critical materials needed to build EVs.
Other governments should counter these kinds of activities through like actions so the competitive advantages are sustainable. Tariffs are not sustainable by nature; they are a short-term fix that can have broad punitive consequences for what the country sells back to the country being penalized by Tariffs. China buys a lot of produce and other things from the US, while the US buys far more from China than China buys from the US; what they do buy isn’t trivial either, and these industries will likely suffer badly during this conflict, requiring the US to subsidize them to prevent broad industry failures.
Farming would take the biggest hit (mostly soybeans). The last time this trade war happened, which was a far smaller event than anticipated this time, things didn’t go well, and farmers are anticipating it will not go well again.
Wrapping Up:
China’s EV makers are moving to litigation in the EU when the US, Tesla, and Musk are gaining popularity. Tesla has significant strategic exposure. Once a correction is in place, it is unlikely any US company will, unless the US’s image there improves, be able to sustain a legislated advantage over their Chinese competitors. While initially, this is just Tesla at risk, this will change as Europe increases its EV adoption and China can leverage its cost and technical advantages to market dominance when EVs become the dominant form of automotive sales. Norway has already made this switch, China will do so this year, and other countries are expected to follow over the next decade.
This trend benefits China and the environment, but if it isn’t countered, China will likely control the future EV Automotive market.
Rob Enderle is a technology analyst at Torque News who covers automotive technology and battery development. You can learn more about Rob on Wikipedia and follow his articles on Forbes, X, and LinkedIn.