Tesla CEO Elon Musk, head of the world’s largest EV manufacturer, doesn’t want Washington’s help in the auto market. Last week, the Biden administration announced it will hike tariffs on Chinese EVs to 100%, owing to alleged unfair policies on the part of Beijing and a need to protect U.S. jobs.
On Thursday, Musk said he disapproved of the new U.S. tariffs. “Neither Tesla nor I asked for these tariffs. In fact, I was surprised when they were announced,” he told a technology conference in Paris via video link.
“Things that inhibit freedom of exchange or distort the market are not good,” he continued.
During an earnings call in January, Musk called Chinese car companies the most competitive in the world. Without trade barriers, he told analysts, Chinese EVs “will pretty much demolish most other car companies in the world.”
Non-Chinese car companies are struggling to compete with Chinese manufacturers. Foreign brands like Volkswagen and Nissan were slow to switch to EVs, allowing local firms to take market share. Now, competitive Chinese companies, like BYD and its ultra-affordable cars, are threatening to unseat legacy automakers in markets like Europe and Southeast Asia.
Musk doesn’t think Tesla needs government help to survive. “Tesla competes quite well in the market in China with no tariffs and no deferential support,” he said on Thursday. “I’m in favor of no tariffs.”
Tesla is China’s second-largest seller of “new energy vehicles,” a category that includes both battery electric vehicles and plug-in hybrids, only behind BYD.
Dueling tariffs
Western governments have been scrutinizing Chinese-made EVs in recent months as they accuse Beijing of fostering “overcapacity”—the idea that the government, through subsidies, is encouraging companies to produce more than what the local market can consume and dumping the surplus overseas at artificially low prices.
Last week, China said it “strongly opposed” the latest round of U.S. tariffs, which also hit goods like semiconductors and medical products, and pledged to take action. Soon after the Biden administration unveiled its new tariffs, Beijing launched an antidumping probe into polyformaldehyde copolymer, a chemical product, from the U.S., Europe, Taiwan, and Japan. The chemical is a kind of plastic used in electronics, auto parts, and medical equipment.
The European Union is also considering additional tariffs on Chinese EVs, as part of an anti-subsidy probe launched last October. An April report from research firm Rhodium Group predicts the EU will impose tariffs in the 15% to 30% range.
Yet the firm warns that Chinese producers will still be able to generate comfortable margins at those tariff levels. Duties may need to be as high as 50% for the European market to be unattractive to Chinese manufacturers.
China is also considering imposing tariffs on imported cars. A report from the state-run Global Times published on Tuesday suggested China could raise tariffs to 25%, citing an expert from a government-affiliated auto research body. China currently has a 15% import tariff for cars.
Chinese EV manufacturers have resisted suggestions that their success is the result of government support. European accusations “do not make sense,” William Li, founder of Chinese EV startup Nio, told the Financial Times on Thursday. Executives from Chinese EV firms like BYD and Great Wall Motor have also rejected the West’s “overcapacity” argument.
