Chinese electric vehicle (EV) manufacturers, including the industry leader BYD, are escalating their exports to Brazil and Mexico amid impending trade restrictions and tariff increases, according to sources cited by Nikkei Asia. This move comes as a direct response to the United States imposing a 100% tariff on Chinese EVs, a policy expected to be mirrored by other US allies targeting imports from China.
It's clear to all industry observers, that the US simply cannot compete with the quality, innovation and pricing of Chinese made cars. The US dealer network is an entrenched institution that does not like anything or anyone upsetting its highly profitable apple cart. Unable to compete on the world stage, the US car industry has lobbied Washington for protection – and that has come in the form of a 100% tariff on Chinese vehicles. So how can China respond?
Industry insiders report that the transportation of EVs from China to Brazil and Mexico began accelerating in March and will persist through June. This surge coincides with Brazil reinstating tariffs on electric vehicles, which had been waived since 2015. Initially set at 10% in January, these tariffs are slated to rise to 18% by July and reach 35% by July 2026.
The escalation in export activities has led to a dramatic increase in shipping costs. “Shipping container prices for the China to Brazil route have escalated between four- and six-fold since late March,” a source in the shipping industry revealed. Prices that hovered around $1,500 earlier this year have now surged past $6,000.
BYD has reported a significant uptick in its EV exports, which increased by more than 150% in the first quarter of 2024 alone, reaching over 97,000 vehicles. Brazil was a major destination, receiving 15,700 of these vehicles. To further capitalise on local demand, BYD is accelerating the construction of a new plant in Brazil and has plans to establish another facility in Mexico.
The United States, under the administration of President Joe Biden, has expressed concerns regarding Mexican partnerships with Chinese automakers. Following the tariff announcement, the U.S. warned of additional penalties if Chinese firms attempt to relocate production to Mexico to circumvent US tariffs.
Mexico, for its part, has not introduced new tariffs on Chinese EVs. However, it has ceased offering incentives like low-cost public land or tax cuts for EV production within its borders, a change reported by Reuters.
The shift in U.S. policy has evidently influenced trade dynamics in the region. A representative from the Japanese commodity trading house Hanwa indicated that the increased shipments to Mexico are likely a reaction to U.S. trade measures and the potential for even stricter sanctions, especially if Donald Trump is re-elected as president.
The heightened demand for shipping capacity has sparked intense competition among EV manufacturers for available slots on cargo ships. “Most big EV companies have existing contracts, but now require additional allocations for extra slots to expedite shipments,” a freight brokerage source in China explained. Consequently, the overall shipping costs on the China to Brazil and Mexico routes have seen significant increases.
Data from the Shanghai Shipping Exchange corroborates this trend, showing a 56% increase in freight costs on the China to South America route from late January to late April, with a further 15% rise noted between April 26th and May 10th.
Amidst these developments, the European Union has commenced an investigation into Chinese EVs over alleged unfair subsidies, with provisional duties potentially being imposed as early as July.
Scott Kennedy, a senior adviser at the Centre for Strategic and International Studies, contextualised the US tariffs as part of broader measures aiming to safeguard and promote domestic industries. He noted, “The administration is attempting to coordinate its policy steps with those of like-minded countries in Europe, Asia, and elsewhere.”
The UK's solution to cheaper Chinese imports was, arguably, one of the smartest policies seen in recent years. By insisting that >40% of EVs sold into the UK are built with UK-sourced materials/parts – we have integrated ourselves into the plans of any/all who would want to access our market. A rare ‘clever' moment for Government.
Luckily, there are no real ‘local' challengers in the charger market, so companies like Humax and Rolec should be able to continue to supply low cost/high quality units without fear of tariffs.
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