Shares of three companies tied to the electric vehicle (EV) space -- all of which could benefit from a surge in U.S. EV production -- were trading higher on Tuesday as investors digested the news that sharply higher tariffs on Chinese-made EVs are likely to be implemented soon.
Here's where things stood as of 2:30 p.m. ET today for charging providers Blink Charging (BLNK -5.50%) and ChargePoint (CHPT 0.37%), and for MP Materials (MP -9.28%)
- Blink Charging was up 6.6%.
- ChargePoint was up 8.7%.
- MP Materials was up 11.2%.
Why the White House is jacking up tariffs on Chinese electric cars and batteries
The Wall Street Journal reported late last week that the Biden administration will soon implement a sharp increase on tariffs on Chinese-made EVs and EV batteries.
The plan to raise tariffs on EVs has drawn the most attention, because it's a drastic change. The White House plan would increase tariffs on EVs imported from China from 25% now to roughly 100%, the Journal reported. That's likely enough to dissuade low-cost China EV makers like BYD and Xiaomi from even trying to export their vehicles in volume, at least for the time being.
Image source: Blink Charging.
The move reflects a growing acknowledgement of the quality of China's domestic EVs. Chinese automakers have rushed to meet high domestic demand for EVs, driven in part by government clean-air incentives -- and in part by consumers' intense interest in the advanced connectivity and technology features that have become commonplace in that fast-moving market.
In particular, BYD's EV sales in China have exploded in recent quarters, thanks to a lineup of mass-market models featuring good range and cutting-edge technology at highly competitive prices. Noting the trend, cellphone giant Xiaomi launched its first-ever EV earlier this year, the Xiaomi SU7. It's a sporty sedan with Porsche-influenced styling and a long list of tech features that's comparable to Tesla's Model 3 -- at a starting price that's about $4,000 lower.
Clearly, these developments have the White House worried. The U.S. EV adoption rate has lagged China's for a number of reasons. The story is complex, but the key thing to note is that at the moment, U.S. EV production and supply chain development are probably several years behind China's.
That's far enough behind to be vulnerable to disruption if low-cost Chinese-made EVs suddenly began appearing in the U.S. in quantity. Hence the White House's plan, which -- it hopes -- will protect domestic EV efforts until they get to sustainable, competitive scale.
How the likely tariffs might -- and might not -- affect these companies
It's easy to see how the tariff hike would help MP Materials, which is working to scale up domestic U.S. mining of key minerals necessary for EV battery production. Tariffs on Chinese-made EV batteries seem all but certain to make domestic battery production more competitive. And domestically sourced minerals will be key to an expansion of that production.
But it's a little harder to see how this might help ChargePoint and Blink Charging, both of which run public charging networks and provide chargers for homes and businesses. It seems likely that both companies would benefit from a surge of inexpensive EVs on U.S. roads, no matter where those EVs are made.
If nothing else, it's a reminder to investors that the market's short-term moves aren't always justified by fundamentals. Trade carefully.
