Chinese EV companies, which have come under intense pressure this year, have another issue to contend with. Nio stock price has already crashed by 41% this year while Xpeng (XPEV) and Li Auto (LI) have tumbled by over 27%. BYD is the only positive Chinese EV company this year as it continued to gain market share.

Li Auto vs Nio vs XPeng vs Tesla stocks

These electric vehicle stocks have tumbled because of the rising competition in their domestic market and abroad. China has over 100 EV companies, which has led to a price war that has affected their margins. There are also signs that growth in China’s EV market is slowing substantially.

Therefore, these companies are targeting the international market to gain market share. The most obvious market is in Europe, where a company like Tesla has achieved remarkable success. Tesla is the best-selling vehicle brand in Norway. 

However, these companies are having mixed success in their European expansion plans since they are mostly unknown brands. As I wrote in April, there are reports of Chinese EVs piling up in European ports. 

Still, in the long term, most analysts believe that many European customers will be open to buying Chinese EVs. That’s because these vehicles are typically cheaper than those made in Europe and have advanced technologies. 

The biggest risk for companies like Nio, Li Auto, BYD, and Tesla is that China is doing what it did for the solar and steel industries. Helped by huge subsidies, the country dumped these items to the market, killing local industries.

It is against this backdrop that China EV companies are now contending with another dose of bad news. According to Bloomberg, the Biden administration is considering ramping up tariffs on Chinese EVs in a bid to protect the domestic market.

The tariff announcement will come out as soon as next week as Biden continues to trail Trump in the presidential race. For Biden and the Democrats, however, the ongoing trends in the EV industry mean that their policies are hurting American workers.

Biden hopes that the tariffs will prevent Chinese manufacturers from selling their vehicles in the United States. Companies like BYD, Li Auto, XPeng, and Nio don’t sell vehicles to the US. According to media reports, BYD is considering launching a plant in Mexico to serve US customers.

These tariffs will have unintended consequences for American automakers, including Tesla. China will likely retaliate by putting more emphasis on its industry. Tesla makes substantial sums of money in the country while General Motors sold 2.1 million vehicles to China in 2023.

The US is not the only country focusing on Chinese EVs. In 2023, the European Commission launched an investigation about the industry and analysts expect that it will issue tariffs. That’s because countries like France, Germany, Italy, and Spain are big players in the auto industry.

EU tariffs on Chinese companies would hurt European companies like BMW and Volkswagen that make a fortune in the country. It will also hurt firms in other industries like Remy Cointreau, LVMH, and Kering.

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