Trump Tariffs - handing the global auto industry to China?
Bloomberg’s David Fickling published an excellent article last week. The opening paragraph says it all: “If you had a vision of the future where the global car industry wasn’t dominated by China, you can kiss those dreams goodbye”.
He argues, correctly, that the biggest losers when the levies take effect will be Japan and South Korea. Japan & South Korea account for one third of the cars imported directly into the US but pretty much two thirds of all cars imported into the now defunct NAFTA bloc. South Korean and Japanese companies produced more than a quarter of all EV batteries last year, making them the only serious challengers to China’s near-total dominance.
Fickling continues: “If you’re wanting to bring manufacturing jobs back to the heartlands of America, landing a blow against these two Asian allies is a strange way to go about it. South Korea was the biggest foreign investor in new projects in the US in 2023, signing off on $21.5 billion of greenfield plants. Japan, meanwhile, has spent decades assembling the largest portfolio of foreign direct investments in the US, with $783 billion of assets”.
The point Fickling perhaps misses is that China has already achieved global dominance. Chinese domestic vehicle sales, at 25.6m, are already 55% larger than that of the United States (16.5m). Equally important is the ongoing surge in EV penetration rates. Preliminary 1Q25 sales volumes suggest EV sales climbed 34%yoy with penetration rising 10% to 46% of the overall passenger vehicle market.
Recent announcements from BYD and CATL, among others, confirm that ranges are increasing and recharging times are dropping like a stone. On Wednesday CATL signed a cooperation agreement with Sinopec to jointly build over 500 battery swap stations this year with a longer-term target of 10,000.
Bizarrely for a country that prides itself on delivering efficient infrastructure, the one major constraint that may hold the EV market back is the struggling grid. According to the National Energy Administration some 6.2% of wind power and 6.1% of solar power were ‘curtailed’ (i.e. lost) in the first two months of 2025 with the grid unable to receive the wind and solar power generated. This was up from 4% and 4.3% last year.
Closer to home the UK National Grid spent approximately £1.23b to curtail wind power generation last year as farms were paid to temporarily switch off turbines due to grid constraints.
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