The Wall Street Journal: Western anxiety about Chinese EVs could prove self-defeating

US "China hawks" should be cautious about overplaying their influence on electric vehicles (EVs) in their political battle, according to a report by The Wall Street Journal.

Changed rules for getting a tax credit on EV purchases in the US aims to stimulate sales buy allowing up to $7,500 credit available at the point of sale rather than at the end of the tax year. However, among new sourcing requirements designed to foster a North American supply chain, battery components manufactured in China, the world's largest supplier, now make models ineligible.

As a result of the new rules, the rear-wheel-drive and long-range versions of Tesla's Model 3 just lost the credit. The Cadillac Lyriq and Chevrolet Blazer EVs made by General Motors also lost the credit temporarily. "Ford Motor's Mustang Mach-E no longer qualifies for the half share of the subsidy."

Both carmakers and environmentalists expect to see more affordable EVs. The Wall Street Journal analyzes that Chinese companies have to own less than 25 percent of a battery-parts producer to avoid disqualifying a vehicle. "This rules out all but the most lopsided joint ventures, though it does leave the door open to technology licensing-the approach Ford is pursuing with the Chinese battery giant CATL at a new plant in Michigan", said the article.

However, EV tax credits aren't the only evidence of how US "China hawks" are prevailing in Washington. "The Biden administration is considering an increase in import taxes on Chinese EVs, even though they are already high at 27.5 percent and hardly any Chinese EVs are currently imported", mentioned Stephen Wilmot.

Apart from Washington, France also issued restrictions on EV subsidies that exclude products imported from China, claiming that "made-in-China EVs cost a lot of carbon to make and bring to Europe".

The European Union is also thinking about increasing tariffs on EVs imported from China and has investigated the potential "illegal subsidization" of EVs that might cause "economic injury" to its own producers. Meanwhile, Chinese EV giant BYD said "it would build its first European car factory in Szeged, Hungary" without waiting for investigation results.

The article pointed out that the West is cutting off its nose to spite its face. "Slow down the shift to EVs too much to build local supply chains and give domestic manufacturers time to adapt, and Chinese technology might simply pull farther ahead, supported by a huge, generously subsidized domestic market and exports to emerging economies", warned the article.

The article ends with "it will be hard for the West to strike the right balance between protecting domestic supply chains and creating globally competitive ones".