Are Chinese Cheap Electric Cars Redefining the Economics of EV Ownership?
Electric vehicles have exploded in popularity worldwide, but it can come as a surprise to many to learn that the most enthusiastic EV drivers aren’t in North America or Europe. Instead, they’re across the Pacific: China is the world’s biggest electric vehicle market, accounting for almost 60% of the neighborhood electric vehicle (NEV) market, with nearly 6 million EVs sold in 2022 alone.
You’d be hard-pressed to find an electric car for less than $30,000 in the United States, but in China, a cheap electric car retails for about $10,000. You might be wondering how that’s possible, and, more importantly, whether Chinese cheap electric cars will be on dealership lots near you in the near future.
Take a look at the following guide for the answers to these questions and a few ideas about how China’s EV industry will affect the market elsewhere.
Why Are Chinese EVs So Cheap?
Several factors have coincided to make Chinese electric cars so much more affordable than their counterparts in North America and Europe. For one, the Chinese government recognized long ago that they could never compete with established automakers manufacturing internal combustion engine-driven cars.
Their response? A wide-ranging series of subsidies, tax incentives, and other policies designed to make China more competitive in the world’s newest car industry. Beginning in 2009, when EVs were still a niche product struggling with the long-gone reputation for unreliability, China gambled heavily on making them as affordable and easy to find as possible.
Government investment nurtured a homegrown industry of both EV manufacturers and OEMs, creating a competitive market in which auto manufacturers kept prices low to attract customers. It also helped that Chinese drivers generally look for value when car shopping, rather than luxury or extra features.
But perhaps the biggest factor contributing to China’s ultra-low prices was its position in the battery industry. Batteries account for 10-25% of the cost of a new EV, and China happens to be one of the world’s major producers of cobalt, lithium, and graphite — all critical ingredients in EV batteries. Local production keeps costs low and allows manufacturers to pass on the savings to drivers in the form of lower price tags.
Other factors have contributed to the popularity and spread of electric vehicles in China, including growing urban populations, rising petroleum costs, and increasing pollution in Chinese cities. Beijing’s investment in the technology might have seemed like a long shot in 2009, but it turned out to be a great decision that’s seriously paying off for Chinese drivers.
Why Americans Can’t Buy Cheap Chinese EVs
If Chinese EV prices as of 2023 are starting to look increasingly attractive, don’t get your hopes up. Currently, no Chinese EV makers are manufacturing or selling their products in the United States.
There are several reasons why. For one, Chinese manufacturers already operate in the world’s largest EV market, making the expense and effort of expanding to the American car market too steep to be worth it. More importantly, economic and political tensions are likely to continue posing obstacles to the sale of all kinds of Chinese goods in the United States–cars included.
A 27.5% tariff on imported Chinese cars is another major stumbling block. Car buyers can find a Chinese EV for sale online relatively easily, and it’s even possible to arrange for shipping to North America. That tariff, however, would eliminate any savings you could hope for, raising the price to around the same as a Chevrolet Bolt.
That’s still low compared to a Tesla Model 3 or a Volvo XC40 Recharge, but not low enough to justify the extra headache of arranging and overseeing transportation, customs duties, and other tasks and expenses. Until trade relations between the two countries warm up, Chinese electric cars will probably remain an option only for the most dedicated enthusiasts or those who take a trip across the Pacific.
EV Prices 2023: Will the United States Ever Measure Up?
For anyone wondering if American EVs will ever compare to their Chinese equivalents in price, the answer is probably not. As previously mentioned, China is a powerhouse when it comes to battery production. While the United States is rich in natural resources, it doesn’t have much in the way of minerals and raw materials needed to produce EV battery packs.
In fact, even the largest U.S.-based manufacturers like Tesla have to source their batteries from China, which is why the company set up a facility in Shanghai in 2018 to minimize production costs. And while there are some comparatively cheap electric cars available, like the aforementioned Bolt, automakers outside of China typically sell their vehicles at a higher price to offset the cost of manufacturing.
It’s not all bad news, however. North American prices may never get as low as they are in China, but an expanding used EV market is making it possible to pick up a pre-owned electric car for much less than the lot price (but watch out for the crazy high battery replacement costs!) Several governmental initiatives are opening EV ownership up to buyers with smaller budgets as well.
Most prominent is the Inflation Reduction Act of 2022, which includes purchase incentives for new EVs. More importantly, Section 45X of the IRA provides for 10 years of production credits for battery manufacturing. In other words, automakers could start building their own batteries at significantly lower costs with help from Washington, which could then place new EVs within reach of more drivers as early as 2030.
Here’s Hoping for a Cheaper EV Future!
As the world’s largest electric vehicle market, China’s innovative blend of government incentives, local resource advantage, and market dynamics has led to the emergence of remarkably affordable electric cars. While the allure of these budget-friendly Chinese EVs may not yet grace American showrooms due to economic and political barriers, the evolving landscape of EV ownership, fueled by governmental initiatives and potential battery manufacturing breakthroughs, hints at a future where affordable electric transportation could be within the grasp of a broader range of enthusiasts and budget-conscious consumers alike.