Electric car trade conflict with China claims global collateral victims

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As of today, tariffs are in place to protect the European market from subsidized Chinese electric cars. However, the automotive industry is now so globalized that there is collateral damage, which also affects EU countries with their own car production – above all Germany. The fact that the world has become too complicated for many protectionist measures is therefore not an exclusively European problem.

The US online portal Ars Technica shows what it would mean if the USA were to implement another planned measure, using Polestar as an example of the company that is potentially the hardest hit. Polestar is a Swedish company with US production and is listed on the US stock index NASDAQ. And yet a new protectionist measure from the US government could sweep it off the North American market.

Connectivity problem

If the ban on Chinese software and hardware for connected cars comes into force, Polestar believes it will have to leave the US market. This would affect cars with Chinese connectivity software from model year 2027 (from mid-2026) and Chinese connectivity hardware from model year 2030, including from electric car production in the state of South Carolina.

Congress has already enacted the removal of electric car subsidies for models produced in China or with battery components from China. According to the report, the US Department of Commerce has also already put pressure on Mexico not to offer Chinese car manufacturers any incentives to locate near the US border, as many European car manufacturers have already done, producing cheaply there and exporting to the US. In any case, Chinese electric cars have already been subject to a 100% tariff since May.

EU manufacturers fear retaliation

The background to the levies, tariffs and subsidy restrictions is the Chinese government's subsidies, which have been heavily promoting exports from its automotive industry for years in order to support the weak domestic car market. The European Union has now also responded to this by imposing tariffs of up to 35.5 percent on electric cars produced in China, although many European car manufacturers fear retaliatory measures.

Polestar feels the regulations are too broad and said: "When a large portion of manufacturing and software development takes place outside the country of a foreign adversary (i.e. China), mere ownership should not be the determining factor for the application of the various prohibitions within the proposed rule." Of the 2800 employees, only 280 are based in China and since the company's "key decision makers" are based in Sweden, there is little reason to believe that the national security concerns apply here.

Possible victims also include traditional US brands

In addition, Polestar operates in the USA as a subsidiary of a British public limited company listed on the NASDAQ. The head office is in Sweden and seven out of ten board members are from Europe or the USA. The Polestar 3 will be manufactured in South Carolina and the Polestar 4 in South Korea from next year.

Although Polestar is the car manufacturer most affected by the new regulation, Ars Technica writes, it is not the only one. Last month, the Department of Commerce informed the traditional American brands Ford and General Motors that imports of the Lincoln Nautilus and the Buick Envision –, both of which are manufactured in China –, would also have to be discontinued under the new regulation.

(fpi)