China takes on US over EV subsidies

Max McDee, 27 March 2024

In a move that could reverberate through the global electric vehicle market, China has officially challenged the United States' Inflation Reduction Act (IRA) at the World Trade Organization. Beijing claims that the act's EV subsidies unfairly benefit US companies and give them a competitive edge in a fast-growing market.

The crux of the dispute centers around the IRA's generous tax credits for consumers looking to buy an electric car. Currently, tax breaks of up to $7,500 are available, but they come with some important strings attached. To qualify, both the vehicle and its battery components need to be made predominantly in North America. This provision aims to boost the US auto industry, but it's a major roadblock for automakers in other countries, particularly China – the world's current superpower in EV production.

BYD electric cars ready for shipping BYD electric cars ready for shipping

China has long been a frontrunner in the electric car race, thanks in part to government support. Now, as Chinese carmakers like BYD, Nio, and XPeng expand into new markets, the IRA could hinder their progress, especially in the lucrative US market.

This isn't the first time that China has taken a stand with the WTO against US policies. The two countries are no strangers to trade disputes, and this latest clash is bound to stir more than a few sparks in the electric vehicle market.

The US Trade Representative, Katherine Tai, was quick to defend the IRA, arguing that it plays a pivotal role in accelerating the transition to clean energy. She further accused China of employing non-market strategies that primarily benefit Chinese manufacturers.

President Biden introduced IRA last year President Biden introduced IRA last year

With the case now before the WTO, it's too early to tell what the ultimate outcome might be. Trade disputes can drag on for months or even years, and the final judgment will likely have a ripple effect on the future of electric cars.

Here's where things get interesting: If the WTO finds in China's favor, the US could appeal the decision. While this would delay and complicate the process, it also highlights deep-rooted issues within the WTO. The ability to appeal rulings at its top appellate body is currently stymied, due to the US blocking the appointment of judges since 2019.

So, what does all this mean for you? For now, not a lot may change. However, if you're considering buying an electric car, it's definitely worth keeping tabs on the situation. If China's case gains traction, it could shake up the EV market, potentially leading to more choices and lower prices for consumers. Then again, if the US manages to uphold its position, it would provide a further boost to US domestic EV manufacturing and likely accelerate the industry's growth within the country.



Reader comments

  • Anonymous

"China has long been a frontrunner in the electric car race, thanks in part to government support." - Exactly. There's a reason why they grew they way they did, with their government's support. Now, the US wants to do the same ...



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