New Senate Bill Proposes 125% Price Hike on Chinese Cars

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New Senate Bill Proposes 125% Price Hike on Chinese Cars

I don’t mean to say ‘I told you so,’ but it’s hard not to notice the recent surge in mainstream media coverage about the threat the rising Chinese auto industry poses to U.S. manufacturers. For those of us who’ve been keeping an eye on the car industry and the electric vehicle market, this isn’t news. However, it’s now becoming a widespread concern, and even America’s politicians are starting to pay attention. But tackling the challenges posed by China’s automotive growth is easier said than done.

This sets the stage for today’s edition of Critical Materials. Also in the lineup: Apple’s ongoing ventures into the automotive industry are far from over, and Fisker is making strides in the U.S. market with new dealership openings.

30%: Senate Bill Aims to Increase Prices of Chinese Cars (Including Those Manufactured in Mexico)

Due to two decades of substantial government investment, insights gained from Western manufacturing collaborations, and low labor costs, China’s electric vehicles (EVs) are often seen as leading the global market. Currently, this advantage doesn’t significantly affect the U.S. market because these vehicles are hit with a 27.5% tariff. However, major Chinese car manufacturers, especially the industry titan BYD, are looking to establish manufacturing bases in Mexico. This move is seen as an attempt to circumvent these tariffs, as vehicles produced in North America would, in theory, not be subject to these charges.

However, U.S. Senator Josh Hawley, a Republican from Missouri, is set to introduce a bill today that aims to prevent this scenario. According to Reuters:

Hawley’s bill would raise the base tariff rate to 100% from 2.5 percent currently, which would mean a total tariff of 125% on all imported Chinese autos from 27.5% currently. It also seeks to apply the 100% tariff hike to vehicles assembled in Mexico by Chinese-based automakers.

Hawley said President Joe Biden should take steps to protect U.S. auto workers “from the existential threat posed by China.”

This perspective is not unique to Senator Hawley but is echoed by politicians across the spectrum, the auto industry’s lobbying groups, and proponents of manufacturing. However, there are several considerations to bear in mind.

Firstly, this proposal is just one bill, and its eventual enactment—if it happens—may see it significantly diluted from its current form. Additionally, without access to the bill’s text, which is not yet public, it’s uncertain how such legislation would affect vehicles like Volvos and Polestars, which are produced by China’s Geely.

Another important aspect is the potential for reciprocal tariffs from China. Given the vast array of goods the U.S. imports from China, any retaliatory measures could have considerable economic impacts.

As electric vehicles, their future, and the auto industry’s efforts to adapt continue to be pivotal issues, we can anticipate more legislative initiatives from the U.S. government aimed at addressing these challenges.

60%: Rest Assured, Apple Isn’t Bowing Out of the Automotive Game

Recently, there’s been quite the buzz in both mainstream and financial media following reports that the Apple Car project has been shelved. This news has sparked a wave of speculation tying it to broader concerns about the future of electric vehicles. However, it might be premature to draw such dire conclusions. Frankly, it’s rather astonishing that Apple’s enigmatic venture into the automotive world endured as long as it did.

This decision appears to be Apple making a logical conclusion after spending a decade and untold billions on a project that failed to materialize. Early skeptics seem to have been correct in their assessment that venturing into the manufacture of an actual car was a stretch too far from Apple’s core competencies.

Yet, Apple’s influence on the automotive industry hasn’t required the company to produce a single vehicle, as noted by a keen observation from The Atlantic. Apple has already made significant contributions in two major ways: the widespread adoption of Apple CarPlay has become a staple in vehicles, and Apple’s signature design and user experience philosophy now underpin the software interfaces of nearly all modern vehicles.

The phrase ‘smartphones on wheels’ often used to describe EVs? That concept owes a lot to the iPhone:

But Apple is so big, and its devices so pervasive, that it didn’t need to sell a single vehicle in order to transform the automobile industry—not through batteries and engines, but through software. The ability to link your smartphone to your car’s touch screen, which Apple pioneered 10 years ago, is now standard. Virtually every leading car company has taken an Apple-inspired approach to technology, to such a degree that “smartphone on wheels” has become an industry cliché. The Apple Car already exists, and you’ve almost certainly ridden in one.

[…] Now basically everyone has a smartphone, and basically every car has a touch screen. Today, not being able to connect your iPhone to your car would be shocking. As of 2022, a reported 98 percent of new vehicles in the United States had Apple CarPlay. The service doesn’t seem to directly generate revenue yet, but it further locks people into Apple’s screen universe: wake up and turn off the alarm on your iPhone, scroll through social media on an iPad over breakfast, drive to work while blasting Spotify through CarPlay, then type into a MacBook in the office.

Apple CarPlay, along with Android Auto, has become so integral and well-received that General Motors faced significant backlash when it suggested its future EVs might not incorporate these smartphone mirroring systems. Since that announcement, other car manufacturers, including those using GM’s EV technology, have made it clear they will continue to support Apple CarPlay moving forward. The widespread appreciation for this technology highlights its non-negotiable status among consumers.

This widespread adoption places Apple in a pivotal position in the automotive world, especially in areas like navigation, charging station planning, and data analytics. Apple’s influence in the automotive sector remains robust, even without producing a physical car. Future iterations of CarPlay, as anticipated, are expected to integrate even more deeply with vehicle dashboards.

While the physical Apple Car may not have materialized, Apple’s impact on the automotive industry is undeniable. Essentially, the essence of Apple’s innovation is evident in many aspects of modern vehicles. As for GM’s stance on excluding CarPlay from its Ultium lineup, there’s a strong belief they might eventually reverse that decision. Would anyone wager against that prediction?

90%: Fisker Establishes Three Dealerships in New York, Florida, and Indiana

EV newcomer Fisker has faced its share of challenges recently. While owners are fans of the vehicles, they’re less enthusiastic about the glitches that come with being early adopters. Fisker’s difficulties with deliveries and repairs have been significant, suggesting a dealer network might be the solution needed.

This morning, Fisker revealed an expansion of its dealer network, announcing new partnerships with dealers in Albany, Jacksonville, Florida, and Indianapolis. With these additions, Fisker’s network now includes 12 dealers across the U.S. and Europe, and the company has noted “received interest” from an additional 250 potential dealer partners.

As stated in the company’s press release:

On January 4, 2024, Fisker announced that it would engage in a strategic shift from direct sales to customers in North America to an innovative Dealer Partnership model. The model combines the goal of offering its customers no-haggle pricing on Fisker vehicles (where permitted) and superb service while also providing dealer partners with larger market territories, so they can maintain pricing without concern for local competition. Taken together, these goals represent a win-win-win for customers, dealers, and Fisker. The transition to dealer partners aligns with Fisker’s asset-light business model, which enables the company to significantly scale for Fisker Ocean deliveries and higher volume production of additional future models.

Fisker representatives have confirmed the addition of dealerships in North Carolina, South Carolina, Georgia, Maryland, additional locations in New York, and New Jersey to their network. While dealerships may not instantly solve all of Fisker’s challenges, the company’s focus on exclusively electric vehicles could potentially bypass the usual dealership hesitancy towards EV sales. The primary goal is to facilitate vehicle sales and ensure timely repairs. At least, that’s the plan.

100%: What Features Would Have Defined the Perfect ‘Apple Car’?

As discussed previously, the Apple Car’s vision seemed to shift and remain ambiguous over its development period, evolving from the concept of a robotaxi to a $100,000 electric SUV more recently—a segment already crowded in the market.

Let’s step into the shoes of an Apple Executive for a moment. Considering the goal of achieving success for this project, what approach would you have taken? Bear in mind, opting to cancel the project is also a considered response.

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