Shares of electric vehicle manufacturers and their suppliers surged higher on Tuesday as we got more details about tariffs on imports into the U.S. It appears EVs will once again be a topic of intense debate during the presidential campaign, which depending on your view could be good for EV stocks.
Shares of Blink Charging (BLNK -3.80%) jumped as much as 10% in trading today, QuantumScape (QS -2.49%) was up 6.2%, and Rivian (RIVN -2.07%) rose 5.9% at its peak. The stocks closed the day up 5.8%, 1.4%, and 6.5%, respectively.
Protectionism and EVs
The U.S. government said tariffs of 100% on imported Chinese EVs will take effect on Aug. 1 after changes were made to the tariffs on everything from batteries to semiconductors. The tariffs are being put in place to protect U.S. automakers like Rivian, which are trying to build up domestic supply.
Batteries will also get a 7% to 25% tariff for imports coming from China, which could hurt some manufacturers who import product. But it would help QuantumScape bolster its demand within the U.S.
Blink Charging doesn't seem to have any significant catalyst outside of reporting that Mitsubishi UFJ Asset Management increased its stake in the stock in the fourth quarter. That doesn't help Blink Charging turn around its losses, but at least some investors are bullish on the stock.
Will tariffs save the U.S. EV market?
These tariffs are being announced as demand growth slows and more competition comes in to the market. Will these protects help the industry?
They don't do anything about the demand problem, so that's not a part of the move today. But tariffs could help protect U.S. companies from a flood of cheap supply of EVs.
That will help for a while, but the problem is that everyone is increasing EV production. This week, General Motors officially put the Equinox EV on sale, which will compete with the Rivian R2. It also uses a battery structure that isn't QuantumScape's solid-state batteries. Supply from other U.S. manufacturers is just as big a problem as supply from Chinese manufacturers.
We could also see Chinese manufacturers set up shop in other countries like Mexico where a lot of U.S. companies have production. This could allow them to evade tariffs, much like they did in the solar industry where steep tariffs rarely had the impact of helping U.S. solar manufacturers. To this day, the U.S. has a very small solar manufacturing presence as a result.
The bottom line is a big deal
What's clear in EVs right now is that there's an imbalance between supply and demand at the prices most manufacturers would like to sell vehicles for. That's resulted in price wars in China and the slashing of prices in the U.S.
Not surprisingly, margins are declining as a result, and that's not going to change with tariffs. Chinese manufacturers have never had a big presence in the U.S., and this will only keep the status quo. Tariffs won't make Rivian, QuantumScape, or Blink Charging profitable -- and that inability to make a profit is a bigger deal for the stocks long-term.
