China files lawsuit with World Trade Organization against US, citing ‘discriminatory policies’ for EVs in the IRA

China has filed a formal complaint with the World Trade Organization (WTO) against the US Inflation Reduction Act (IRA), claiming its subsidy policies discriminate against foreign automakers and disrupt the global goal of expediting EV adoption while distorting fair competition. A spokesperson for China’s Ministry of Commerce spoke to reporters and shared the details behind the filing.

Suppose you’ve read any of our stories covering the EV sector in China; it’s hard to argue that the country is hands down the global leader in technology and adoption. Having dove head first into developing and implementing New Energy Vehicles (NEVs) well before more legacy automakers in the US and Europe, China has been able to deliver EVs across all segments that are now highly affordable.

Much of that success came from subsidies from the Chinese government for automakers developing the technology and local consumers adopting it, which has worked quite well. Having a lead on the rest of the global market, we’ve seen Chinese automakers expand the reach of their portfolios to new markets across Asia, Europe, and South America.

The response has been a mixed bag so far. Brand recognition and trust remain a massive hurdle for Chinese brands, especially in Europe, where companies like Volkswagen AG and Mercedes still have a significant foothold. However, it’s hard not to be enticed by the range, performance, and, in many cases, luxury of EVs making their way overseas from automakers like NIO, XPeng, and BYD. Still, some governments in the EU are weary of Chinese EVs entering local markets and are trying to slow things down with tariffs.

One market these Chinese brands have yet to touch is the US, whose own local automakers (aside from trailblazers like Tesla, Rivian, and Lucid), are backtracking on EV commitments, leaving a huge gap for EVs made in China to fill. However, the Inflation Reduction Act signed by the Biden Administration promotes local manufacturing – great for the US economy long-term as automakers set up production facilities in North America , but frustrating to some right now if you already have quality products on sale.

Whether US customers opt for EVs made in China is tough to say, but the country believes its products can help expedite adoption and tackle climate change more quickly… as long as the US government shares some of those subsidies that currently only apply to a mere handful of vehicles.

China calls US EV subsidies unfair to fight climate change

China has officially filed a complaint to the World Trade Organization targeting the US’ Inflation Reduction Act, and a spokesperson for the country’s Ministry of Commerce spoke to reporters about the lawsuit and why it feels it was necessary at this point.

China filed a dispute settlement mechanism with the WTO on March 26, 2024, specifically targeting EV vehicle subsidies and other measures enacted into law in the US under the Inflation Reduction Act. Here’s the official statement:

In the name of ‘coping with climate change’ and ‘low-carbon environmental protection,’ the United States introduced the ‘Inflation Reduction Act’ and its implementation details, using products from specific regions such as the United States as a prerequisite for subsidies, and formulated discriminatory subsidy policies for new energy vehicles, etc., and included China. The exclusion of products from other WTO members has distorted fair competition, seriously disrupted the global new energy vehicle industry chain and supply chain, and violated WTO rules such as national treatment and most-favored-nation treatment. China firmly opposes this.

Furthermore, the spokesperson explained that as part of the filing with the WTO, China is imploring the US to play fair and follow the organization’s trade rules, citing the need for more EVs more quickly to battle the ever-looming issue of climate change. Per the report:

China firmly defends the rules-based multilateral trading system and respects the legitimate rights of WTO members to implement industrial subsidies within the framework of rules and promote their own economic and social development. We urge the United States to abide by WTO rules, respect the development trend of the global new energy vehicle industry, promptly correct discriminatory industrial policies, and maintain the stability of the global new energy vehicle industry chain and supply chain.

What do we think? Should EVs made in China be allowed in the US without hefty tariffs? What if those brands build them in North America?

Electrek’s take

Chinese EVs are a very polarizing topic in the global industry. I cover the beat closely, from new models launching seemingly every day overseas, to the expansions to new markets by some of the more prominent brands looking to become global household names, alongside the likes of Tesla and BMW.

I can understand why people, especially governments, might oppose the competition, but it’s hard to justify depriving consumers of Chinese EVs when other automakers aren’t delivering. Even worse, many are backtracking on their plans to deliver “x” amount of EVs by the end of the decade.

I genuinely support the IRA and want to see more local EV builds from all automakers, limit supply chains, create more jobs, and relinquish dependency on other countries for materials and other components. The IRA should do that, but it will take time as all these foreign automakers scramble to move EV and battery production to the continent to become compliant.

At the same time, the main goal is not to sell more cool cars to people but to reduce the number of combustion vehicles on roads around the globe as quickly as possible. To do that, EVs made in China are an incredible option that deserves consideration, whether in the US, Europe, or elsewhere.

China is currently selling compact EVs that cost the equivalent of $14,000. I implore you to find a brand new BEV in the US for under $30,000, even $40,000. Why not at least try to work together to bring affordable EVs to the masses? Even if it merely fills the market gap for the next 5-6 years while the rest of the industry catches up, consumers, and more importantly, mother nature, could benefit.

Don’t get it twisted; I’m not pro-China. I want to see US consumers buying EVs from all automakers that give back to the US economy. Still, it’s hard to argue that the US needs to block out quality EVs made in China that are available to drive today when its local automakers are giving us far too few products to consider, especially those not in the price range for many consumers.

From the perspective of mere technology and scaled production enabling affordability, China is hands down the global leader, and it would be nice if US consumers could be able to take advantage of at least some of those products because many of them are simply better than what legacy automakers are putting out today. After all, China had a head start.

I know global trade is a lot more complicated than what I’m suggesting, and it can’t all be singing “kumbaya” around the fire. Still, I can daydream about a future in which trade talks focus on the environment and EV adoption, where there’s a way brands in China can sell their EVs in the US while stimulating both economies. That’s more realistically more of a pipe dream, though.