China's Trade Deficit in Electric Vehicle Exports to the US

Last Year's Exports Down 28% to $332 Million
Imports at $768 Million, Eightfold Increase
Domestic Surpasses $5 Billion, Record High

Last year, China recorded a trade deficit with the United States in electric vehicle (EV) trade. China is ranked number one in the world in EV production, consumption, and even exports, but it was the only country to run a deficit in trade with the U.S. This is interpreted as a result of the U.S. curbing Chinese EVs. Meanwhile, South Korea's EV exports to the U.S. exceeded $5 billion, achieving a record high.

According to the trade status by country compiled by the Korea International Trade Association on the 16th, China exported $332 million worth of EVs to the U.S. last year, a 28% decrease from the previous year. On the other hand, imports amounted to $768 million, increasing more than eightfold during the same period. The deficit reached $436 million, returning to a deficit for the first time in three years since 2020. In the past, China always imported more than it exported in EV trade with the U.S., but in 2021 and 2022, exports exceeded imports. The U.S. was the only country where China experienced a deficit in buying and selling EVs overseas last year.

BYD vehicles waiting for shipment at a port in China
[Photo by Yonhap News, AFP]

This appears to be due to the U.S. exerting pressure on China's EV 'rise' in various ways. Under the Inflation Reduction Act (IRA), if the Chinese company's ownership exceeds 25%, tax credits are not granted. This signals not to buy EVs linked to Chinese companies or to avoid partnering with Chinese companies in the EV business.

Meanwhile, South Korea's EV exports are sailing smoothly. The volume exported to the U.S. last year was worth $5.047 billion, an 84% increase from the previous year. Considering that South Korea's total EV exports last year were around $14.3 billion, more than one-third of Korean-made EVs sold overseas went to the U.S. The U.S. became South Korea's top EV export destination in 2019 but was overtaken in 2020 and 2021. However, it regained the position as the largest EV export market in 2022 and last year.

The U.S. is considered one of the world's three major automobile markets along with China and Europe. Although the EV market is relatively behind, it is regarded as a market with high growth potential due to the Biden administration's active efforts to expand EV adoption. In particular, the demand for large and high-priced vehicles with higher unit prices is strong, making it a market that global automakers are keen to target.

Hyundai Electric Sedan Ioniq 6
Photo by Yonhap News

South Korea and China are responding differently. Given the continued high level of U.S. pressure on China, Chinese companies are coping by expanding production bases overseas. BYD, which competes with Tesla for the global number one EV spot, was recently reported by foreign media to be considering building an EV factory in Mexico.

Mexico is cited as a favorable location due to the United States-Mexico-Canada Agreement (USMCA), which allows tariff-free trade with the U.S., tax credits under the IRA, and low labor costs. Hyundai Motor Group is converting existing internal combustion engine vehicle plants and building new factories. Jose Munoz, Hyundai Motor's Chief Operating Officer, recently said in an interview that the plant operation schedule was moved up to around October this year. Producing locally enables a $7,500 tax credit.

This content was produced with the assistance of AI translation services.