On June 13th, Bloomberg reported that Li Ke, Executive Vice President of BYD, criticized the United States’ new climate bill, the “Inflation Reduction Act (IRA),” stating that it would increase the cost of purchasing electric cars for American consumers.
Regarding the issue of BYD selling electric vehicles in the United States, she hopes to discuss growth plans in markets such as Mexico, Chile, and Thailand, but makes it very clear that “the U.S. market is not within our current scope of consideration”.
The “Inflation Reduction Act” aims to promote the domestic electric vehicle industry in the United States through tax incentives and funding support, excluding China from the electric vehicle supply chain in the United States. Its preference for American automakers and supply chains makes it too expensive and unsuitable for BYD to operate in the U.S. passenger car market.
“We want to make sure that every step is successful,” Li Ke said in an interview. “I believe IRA may slow down the popularity of electric vehicles in the United States,” and pointed out that IRA makes it impossible for American consumers to buy the most “affordable” option.
One reason BYD can sell its electric vehicles at a lower price is its advantage in batteries. In addition to being a car supplier, BYD is also the world’s second-largest battery manufacturer. China has an absolute advantage in the supply chain of lithium needed for electric vehicle batteries, while the U.S. plan to increase production capacity is still far away.
This means that U.S. buyers must pay a premium for new energy vehicles because the cost of lithium batteries will rise. This price difference may ultimately cause the United States to lag behind other parts of the world in the popularity of electric vehicles, weakening the goal of IRA to address climate change.
Analysts, including Morningstar and BlombergNEF, predict that BYD is likely to eventually surpass Tesla and become the sales champion of pure electric vehicles (excluding plug-in hybrid vehicles). Most experts believe that this transformation will occur in the second half of this century.
Li Ke expects Latin America to be one of the company’s largest expansion areas. “BYD hopes to increase the penetration rate of electric vehicles in Latin America from less than 2% to 10% to 20% within the next three to five years.” Due to the negative impact of IRA, the popularity of electric vehicles in Latin America may exceed that in the United States.
We note that Li Ke is not the only one pointing out problems with IRA. Michael Robinet, Executive Director of S&P Global Mobility Consulting, said that IRA is unlikely to help increase the popularity of electric vehicles because it has not changed the “relative cost of electric vehicles,” which is one of the biggest factors why Americans choose gasoline-powered cars over electric vehicles.
