This article explores the impact of price reductions in the electric vehicle market, particularly in Australia, amidst global manufacturing disruptions caused by potential tariffs and EV policy uncertainties in the US.
MG's significant price reductions on its electric vehicles (EVs) in Australia reflect a broader trend within the industry. While the US market grapples with uncertainties surrounding EV tax credits and the potential for tariffs against major trading partners, Australia's right-hand-drive market appears less affected. Experts suggest that developments in Japan and the UK wield greater influence on this region.
The intricate globalized manufacturing supply chains face disruption due to the threat of tariffs, adding further complexity to the situation.Despite the prevailing gloom, glimmers of optimism emerge. Not all EV incentives can be swiftly rescinded, as some require congressional approval and others enjoy support in Republican states, making their reversal politically challenging. Meanwhile, Australia's EV market, though experiencing a significant slowdown in sales last year, witnessed intensified competition, poised to escalate further in 2025.The electric Ford Mustang Mach-E, manufactured in Mexico, could be susceptible to the 25% tariff imposed on goods from Canada and Mexico, a measure initially announced and subsequently paused by former President Trump. General Motors, following a multi-billion dollar upgrade of its CAMI plant in Canada, is preparing to export electric vans branded as Chevrolets. The reliance of factories on economies of scale for profitability may incentivize manufacturers to explore alternative markets, including Australia. Industry analyst, Booth, emphasizes that Australia will not witness a mass influx of EVs due to the specific requirement for right-hand drive vehicles. Matt Hobbs, CEO of the Motor Trades Association of Australia, echoes this sentiment, asserting that US policies and tariffs will have minimal impact on car sales in Australia. This is partly attributed to the absence of Chinese brands currently selling vehicles in the US. Hobbs further highlights that developments in the UK and Europe, where brands are selling in substantial volumes and the UK utilizes right-hand drive vehicles, exert a more significant influence on the Australian market.Over the past two years, a diverse range of brands, including Ford, Subaru, Mercedes-Benz, MG, BYD, and Tesla, have implemented price reductions or short-term discounts to attract buyers and clear inventory. The decline in prices for new EVs, encompassing even market leader Tesla, has subsequently trickled down to used car values. Booth anticipates this trend to persist in the near future. He notes that EVs currently do not retain their value as effectively as internal combustion engine (ICE) vehicles, and this disparity is unlikely to change significantly in the immediate future. While all vehicles generally improve over time, incorporating advanced technology and features, the rate of improvement for EVs has been more pronounced. Longer battery life and performance enhancements are complemented by new features and connected technologies, rendering new and updated models more appealing.Government incentives, including the fringe benefits tax exemption on EVs below the luxury car tax threshold, also tend to steer consumers toward new rather than used vehicles, according to Booth. Exchange rates exert a profound influence on car prices, regardless of their power source. Some economists predict that Trump's tariff threats could depreciate the US dollar below 60 cents, representing a 5% decline from its current value. The upcoming federal election in Australia, with the potential for a change in government, could further impact the automotive landscape. The new vehicle efficiency standard implemented this year, aimed at encouraging manufacturers to sell more fuel-efficient vehicles, could be subject to revisions. If elected, the Coalition government may attempt to alleviate the penalties for cars exceeding CO2 emissions targets, currently set at $100 per gram of CO2. Such a reduction could diminish the incentive for manufacturers to focus on fuel-efficient vehicles to offset the emissions of less efficient models.
ELECTRIC VEHICLES TARIFFS AUTOMOTIVE INDUSTRY AUSTRALIA GLOBAL MANUFACTURING EV MARKET USED CAR VALUES
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