The Chinese electric vehicle (EV) market may face additional economic barriers according to recent reports – Nio Inc. (NYSE:NIO) among them. It has been anticipated that President Joe Biden is likely to impose or uphold tariffs on several Chinese domains, including electric vehicles (EVs), semiconductors, batteries, and solar cells.
Sources have noted that there’s an expectation for the present administration to mostly preserve the existing tariffs. There is information circulating that the President is looking to “target key strategic sectors with new levies while rejecting the across-the-board hikes sought by his predecessor.”
However, there’s uncertainty as to which sectors will bear the brunt of these changes. Speculation about the potential decrease of some tariffs exist, but the consensus leans more towards the likelihood of an increase.
Ganesh Iyer, the CEO of Nio USA, had indicated interest in the past year in expanding Nio’s presence to North America by 2025. But he later clarified that the North America expansion plan was still under discussion. While considering expansion, Iyer divulged that Nio was open to forming alliances in the U.S., but noted such a move would require significant infrastructure investments.
In light of the preexisting 27.5% tariff, most Chinese EV companies have avoided the U.S. market. An increase in tariffs would likely act as a bigger deterrent for these companies’ entrance into the U.S. market.
China’s response to the tariff announcement has been less than favorable, as they urge the U.S. to reconsider. Ministry spokesperson Lin Jian commented, “Instead of correcting its wrong practices, the United States continued to politicize economic and trade issues. To further increase tariffs is to add insult to injury.”
This tariff imposition, if implemented, would likely support the domestic EV industry. Critics, however, argue that the move could stifle innovation and affordability, given China’s status as a global leader in EV production. As it stands, there should be minimal immediate financial impact on Chinese EV stocks due to their current lack of presence in the U.S. market.
The potential tariff imposition news coincides with U.S. customers favoring hybrids over EVs due to price, and should new tariffs be applied to Chinese EVs, it could potentially intensify affordability issues.
The views expressed in this article are those of the author, in accordance with our Publishing Guidelines. Regarding the securities involved, the author, Eddie Pan, confirmed he held no positions (directly or indirectly) at the time of publication.
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