Around 60% of the electric cars produced in the world come from China. Until recently, most were sold internally, to drivers in China – but the Chinese know that they have a ‘winning offer' and are looking to expand globally over the next 10 years. Unable to compete on a price-innovation-quality basis, the US has announced a 100% tariff on Chinese EVs. The swapping of economic punches will continue, so where does that leave British drivers?
WhichEV recently reported on the 100% tariff that the US decided to impose on EVs coming into the States from China. This isn't the first time in recent history where the United States has implemented ‘protectionist' policies.
It previously curtailed Chinese companies' access to Google software, including operating systems and the Google Play Store. This move aimed to limit the technological capabilities and market appeal of Chinese smartphones internationally, aligning with US efforts to mitigate security risks and reduce tech dependencies. This move had the side-effect of forcing China to develop alternative systems – potentially leading to increased global technological divergence and much more competition for US products.
The US also restricted Chinese access to ARM processors, essential for mobile devices and emerging tech applications. This measure aimed to block China from acquiring advanced computing technologies, potentially enhancing both civilian and military capabilities. This disruption compelled China to accelerate its semiconductor development – creating more competition in the global market.
With additional threats to its access to high-tech chips, China has decided to move away from relying on Qualcomm processors and chipsets for its future automotive communications plans. This is a significant development, likely aligning with the broader strategy of technological independence and reduced dependency on Western technology. Here are a few implications of this move:-
- Strengthening Domestic Industry
By shifting away from Qualcomm, China likely aims to bolster its own semiconductor and technology sectors. This move supports domestic companies such as Huawei, SMIC, and others involved in the development and manufacturing of chips. It's a step towards self-reliance in critical technologies, especially in the context of past US sanctions that have restricted access to certain technologies - Impact on Global Supply Chains
This decision could reshape global technology supply chains. Qualcomm, as a major player in the semiconductor industry, has substantial engagements with Chinese companies. Reducing these ties might encourage similar actions from other Chinese firms and lead to more pronounced shifts in global production and supply dynamics - Geopolitical and Economic Implications
The move underscores the ongoing technological rivalry between the US and China. It highlights the increasing tendency of major powers to secure their supply chains and technological bases in the face of geopolitical tensions. For the US, this could mean challenges to American tech companies' revenues and their global market shares - Innovation and Market Competition
On a broader scale, this shift could stimulate innovation as Chinese companies might increase investment in research and development to fill the gaps left by Qualcomm technologies. Additionally, it could lead to heightened competition in the global markets as Chinese tech products powered by home-grown technologies vie against those from established Western companies
This strategic shift not only reflects China's ambitions in the tech sector but also suggests a landscape where global tech leadership is more contested, influencing everything from economic policy to international relations.
After a series of reactionary steps, China now appears to be making its own moves to distance itself from the US – including the apparent dumping of close to $60 billion in US bonds. When the idea of China distancing itself from the US economy came up five years ago, CNN was sceptical that it would happen or that it would have any positive outcome for China.
In contrast, the UK's strategy to ‘protecting local markets and revenues', seems to centre on getting foreign EV makers to ‘buy local'. This started with a requirement for certain car makers to source at least 40% of their new EVs from British suppliers. While this could lead to slightly increased costs, it feels like an intelligent way to gently urge multi-nationals to create jobs in the UK.
The stipulation for local sourcing is likely to stimulate sales in ancillary industries in several ways, including:-
- Increased Demand for Raw Materials
Industries involved in the extraction and processing of raw materials needed for EV components, such as locally produced lithium for batteries, could see increased demand - Growth in Supporting Services
Growth in manufacturing will naturally lead to a boost in supporting industries, including engineering, logistics, and maintenance services - Development of SMEs
Small and medium-sized enterprises (SMEs) here in the UK, that provide niche products and services to larger manufacturers, will find new opportunities and markets as the supply chain expands domestically
We're probably not yet at the stage where the Chinese Yuan will challenge the Dollar as the default global currency, but it's easy to imagine more and more of China's trading partners moving across to alternative currencies.
It seems that there will be less trade with the US as a result of all of these actions, which means less competition inside the US – which invariably leads to higher prices. At the same time, if Chinese companies are no longer paying licensing/royalty fees to US companies for using their technology, it could make Chinese alternatives even cheaper on the world market – increasing competition.
In conclusion, the recent trade strategies adopted by the US, UK, and China reflect a complex interplay of economic protectionism and the pursuit of technological independence, reshaping the global electric vehicle (EV) market.
The US has taken a more direct approach with a 100% tariff on Chinese EVs, aiming to protect domestic manufacturers but potentially leading to higher consumer prices and stifling competition. In contrast, the UK's strategy of requiring foreign EV makers to source locally aims to foster domestic industry without drastically increasing costs for consumers, promoting job creation and innovation within the country.
Meanwhile, China's move towards self-reliance in technology, spurred by restrictive US policies, may not only challenge American dominance but also alter global supply chains and economic power structures. As these nations navigate the shifting landscapes of trade and technology, the repercussions will undoubtedly influence global market dynamics, potentially leading to a more fragmented but innovative market environment in the coming decade.
Brits have never really had a soft spot for American cars (not in volume, anyway). The thought that cheaper, more innovative EV models will arrive from China over the next 5 years – probably fills most of us with anticipation than fear.
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