Tariffs on Chinese EV batteries may hurt sales of electric vehicles in the US.

A recent Interact Analysis analysis claims that it will be difficult to prevent U.S. reliance on China for lithium-ion batteries in the near future.


America's shift to electric vehicles  may be hampered by a brewing trade dispute with China.

That's one finding from a recent research note published by international research firm Interact Analysis, which looked at the effects of a number of tariffs the White House imposed in May.

More than half of America's imports of lithium-ion batteries come from China, which is where the U.S. auto industry mostly sources its batteries.

The higher prices run the risk of "further slowing down the electrification process," according to the report, as the tariff on those batteries more than triples this year from today's rates of 7.5 percent to 25 percent.

Already, the cost of electric automobiles is higher than that of traditional gasoline-powered vehicles. According to Cox Automotive, the average transaction price of an electric vehicle (EV) was $55,252, whereas the average for a car with an internal combustion engine was $48,510. Shipping fees and tax credits from the federal, state, and local governments are not included in the prices.

That difference would be made worse by any tariff-related rise in EV prices that consumers would have to pay. The possibility of these obstacles contradicts larger government initiatives aimed at quickening the switch to electricity.

A portion of that entails a passionate campaign to pass the Inflation Reduction Act in 2022 in order to create a domestic supply chain for batteries and their raw materials. However, it might take three to five years for the factories and mines that were brought about by that legislation to start producing.

Experts anticipate a pinch point till then.

According to Shirly Zhu, chief analyst at Interact Analysis, "the U.S. is currently highly dependent on Chinese import products." She said this to Automotive News. "It takes years to build local battery supply, and it may not be easy for OEMs to switch fully to other suppliers in South Korea and Japan in a short time."

China's Ministry of Commerce has pledged to respond to the levies in a "resolute" manner in the interim. These can include export limitations or reciprocal tariffs, or "retaliatory measures," as S&P Global Mobility puts it. As trade tensions with the United States intensify, China has indicated that it is prepared to impose tariffs of up to 25 percent on imported cars with big engines.

According to S&P, China dominates more than 80% of the global supply chain for the extraction and processing of vital minerals.

The demand for these batteries in America has been rising. Lithium ion battery imports into the United States totaled $18.8 billion in 2023, according to Interact Analysis, an international research organization. Of that total, $13.2 billion came from imports, up 42% from the previous year, according to the report.

Even if the tariff hike is new, China has made an effort to broaden its export relationships ever since the United States passed the Inflation Reduction Act and indicated that it intended to expedite domestic supplies. Manufacturers of lithium-ion batteries from China have established production facilities across Southeast Asia and Europe.

That activity, according to the Interact Analysis research, will mitigate the effects of any declines originating from the U.S. market. According to the survey, 70% of the planned battery capacity of Chinese manufacturers is located in Europe. The market for that production is in Europe.

Chinese businesses are looking into related products to expand.

People "are looking for diversified applications to grow business," Zhu stated. "Not only EVs, but also energy storage, among others."

Post time: Jun-07-2024