00:00There's one thing that is quintessentially American.
00:03Cars.
00:05Yes, Americans love their cars.
00:07Last year, more than 16 million vehicles were sold nationwide.
00:11The U.S. auto market, the world's second largest after China,
00:15is also a huge prize for automakers around the globe.
00:18But there's one type of cars you don't see much on American roads.
00:22Chinese cars, especially Chinese EVs.
00:28In some ways, the U.S. EV market looks pretty unusual to the rest of the world.
00:32Look at the top five best-selling EVs in 2025.
00:35Tesla Model Y, Chevrolet Equinox, and Ford Mustang Mach-E.
00:39Meanwhile, in neighboring Mexico, it's a completely different story.
00:43The best-selling EVs either come from Chinese brands or are backed by Chinese capital.
00:47That's right, Chinese EV makers are rapidly expanding across Latin America
00:52and increasingly the European continent.
00:54So, why haven't they made inroads in the U.S.?
00:58One big reason.
00:59Tariff.
01:00Tariff.
01:00Tariff.
01:01Tariffs.
01:01Let me show you.
01:02If today you want to import a Chinese EV into the U.S.,
01:06you first need to cover a base 2.5% most favored nation tariff,
01:10which applies to passenger vehicles from WTO trading partners.
01:14Then, in 2024, the Binance administration quadrupled the Section 301 tariff on Chinese EVs to 100%.
01:21Last year, the Trump administration imposed an additional Section 232,
01:2625% tariff on imported passenger vehicles, citing national security concerns.
01:31Under these tariffs, a BYD Auto II, which starts at around €20,000 pre-EU tariffs,
01:38will cost around $50,000 in America.
01:41Starting from 2024, the EU has also taken action on Chinese EVs, mostly through anti-subsidy tariffs.
01:49But the scale is still much smaller than those in the U.S.
01:52We're continuing to see exports into the EU from the Chinese EV makers.
01:58So, the tariff rate doesn't seem to be deterring the Chinese.
02:02Although, we're seeing the EU start to bear some fruit.
02:07You know, Spain has been a hotbed of foreign direct investment from Chinese battery makers and EV makers.
02:12But the EU, I think, is also trying to balance allowing exports into the European Union,
02:19as long as the Chinese commit long-term to building locally.
02:24But tariffs are not the only reason that keeps Chinese EVs out of U.S.
02:28In January 2025, the U.S. Commerce Department issued the Connected Vehicles Rule,
02:33which bans the selling of vehicles equipped with technology developed by companies linked to China or Russia.
02:38This June, the Commerce Department put the rule to the test and denied EVMaker Polestar to sell in the U
02:44.S. market,
02:45starting from its 2027 model.
02:47Polestar is owned by China's Geely and actually sources most of its U.S. models outside China.
02:53The Polestar 4, for example, is built in South Korea,
02:56while the Polestar 3 is manufactured at a Volvo plant in South Carolina.
03:00Following the denial, Polestar has since announced that it will wind down its operations in the U.S.,
03:05while starting clearing out its remaining inventory by slashing prices up to $25,000.
03:10It's a value, basically.
03:12You know, the discount for this car thing is substantial.
03:17Yes, I am concerned, but EV requires less maintenance and then there are services available
03:26through Volvo, so that is giving some assurance.
03:30If I want you to name some Chinese EV brand, can you say any?
03:34Nope.
03:35I can't think of any, no.
03:37In the U.S., market share for electric vehicles is much more concentrated among a couple.
03:42I know in China, it's much more widespread.
03:44There's a lot more competition driving that pricing down.
03:47I feel like that regulation is a little, like, much.
03:51Technology is technology.
03:52It wouldn't be, like, a security issue of any kind if it's just for a car.
03:56Of course, you can always, like, inspect it to, like, say,
03:59oh, there might be some dangers.
04:01But I feel like to have a whole permit or, like, to just stop, like, other cars from coming here,
04:07that's, like, a little much.
04:08Will you say that U.S. consumers actually kind of harmed by this terrorist regulation
04:13because they don't have access to these cheaper Chinese EVs and cars?
04:16Uh, definitely, yes.
04:17I think there should be healthy competition.
04:19But I'm still curious about how the connected vehicles rule came about.
04:23So I spoke with Jeffrey Irving, who had first-hand knowledge of its development.
04:27The connected vehicle rule was initiated during the Biden administration in 2024.
04:31Again, the two main risks are the risk of data exfiltration as well as remote access.
04:35So cars collect an incredible amount of data, both your precise geolocation data,
04:42your personal identifiable information, as well as increasingly biometric data
04:45for driver monitoring systems that you see for a lot of automated driving systems.
04:50This is absolutely a realistic threat.
04:51It's not speculative or hypothetical.
04:55And that rule might soon have an even bigger impact.
04:57In July, the Senate Commerce Committee voted to advance
05:00the Connected Vehicle Security Act of 2026.
05:03According to the proposed bill, an automaker can be treated as a foreign entity of concern
05:08if it has more than 15% ownership tied to China, Russia, Iran, or North Korea.
05:14That it does expand somewhat the foundational connected vehicle rule
05:17and also clarifies, helpfully, some of the baseline ownership thresholds for
05:24what is classified as whether a company is owned by or controlled by a foreign adversary nation.
05:29The CV rule does not ban the import of Chinese vehicles.
05:34It creates common sense guardrails around specific component systems of Chinese automobiles.
05:39Once the law goes into effect, even Mercedes-Benz could face a total ban in the US
05:44if it fails to lower its Chinese capital below the threshold.
05:47The German automaker is roughly 20% owned by Chinese investors,
05:51including a 9.69% stake from GD founder Li Shufu.
05:55And here's another twist. A Polestar dealership is now suing the company for $25 million in damages,
06:02accusing Polestar of using the government ban as an excuse
06:05to leave the market while avoid payouts to its dealers.
06:08According to the lawsuit, Volvo, which is also controlled by Gili,
06:12has just received authorization in May to continue selling in the US.
06:16But Polestar was denied just one month later and declined to appeal.
06:19So the final question is, should Chinese EVs be banned or not banned in the United States?
06:25I don't think Chinese EVs are banned currently in the US market.
06:28I think the appropriate safeguards are now in place where Chinese EVs and Chinese automakers
06:33can seek to access the US market in compliance with those common sense rules.
06:37For the past two decades, from 1994 onwards,
06:40the PRC imposed an effective ban of foreign imports of automobiles into China.
06:44So through the negative list, as well as a holistic set of industrial policy measures,
06:48foreign automakers were not allowed to import cars,
06:50were required to create joint ventures with domestic PRC firms.
06:53Was it ultimately a net benefit to put an effective ban on foreign automakers
06:57from entering the PRC market for PRC automakers?
07:00And I think the answer to that, we're seeing it was absolutely a net benefit.
07:04If I was part of the Department of Commerce, I would create a framework and say,
07:10these need to be sourced locally by X suppliers or Y suppliers.
07:15OK, data cannot move outside of the United States.
07:19I would likely do also something very similar to Canada, creating a quota.
07:23No more than X number of vehicles can be imported over a short period of time,
07:28three, four or five years.
07:29They need to feel that heat in order to really, really push themselves to innovate,
07:35to build better products, more affordable products.
07:38And without that, unfortunately, the US consumer is paying the price.
07:41Thanks.
