The U.S. has discontinued its most affordable electric vehicle, leaving the Tesla Model 3, which starts at nearly $40,000, as the next option on the list. Despite efforts to promote electric vehicle (EV) adoption through tax credits and climate initiatives, the high cost of EVs in the U.S. continues to be a barrier. Meanwhile, in countries like Mexico and Costa Rica, EVs are far more affordable, with a wide range of options available for under $20,000.
In Costa Rica, for example, EVs are easily identifiable by their green license plates. Brands such as Zaka, Zev, Jack Carri, Cayi, Maxus, and Jilzna, though unfamiliar to most Americans, offer affordable EV options that are banned in the U.S. due to restrictive trade policies. These bans, rooted in historical trauma and protectionism, can be traced back to the postwar economic boom of the 1950s, when U.S. automakers dominated the market, and foreign competition was met with resistance.
The oil crisis of 1973 further complicated matters as oil prices soared, leading to increased popularity for Japanese cars, which were reliable, affordable, and fuel-efficient. This competition forced U.S. automakers to improve their offerings. However, the U.S. government, under pressure from lobbyists and unions, sought to limit Japanese car imports, resulting in negotiated export restraints and the establishment of Japanese manufacturing plants in the U.S.
Fast forward to the 2000s, and Asian automakers accounted for 40% of U.S. car sales, while the U.S. government bailed out struggling domestic automakers. Today, American brands, including Tesla, face challenges in producing affordable EVs, while Chinese automakers like BYD dominate the global EV market. BYD, originally a battery company, has managed to cut production costs significantly, making their EVs much cheaper than those of Tesla.
For instance, the BYD Yuan Plus, a crossover SUV comparable to the Tesla Model Y, costs significantly less to produce, with a sales price in China of just $16,600, compared to the Tesla Model Y’s estimated production cost of $39,000. This price difference is due to BYD’s ability to manufacture their own batteries at a lower cost.
Despite the affordability of Chinese-made EVs, U.S. consumers cannot access them due to high tariffs imposed on Chinese cars. These tariffs, initially set at 25% during the 2018 trade war under Trump, are supported by both political parties and may soon increase to 100%. BYD has opted to avoid the U.S. market, focusing instead on regions where their vehicles are more welcomed.
While the U.S. government struggles to balance reducing carbon emissions with protecting American jobs, countries in Latin America, which do not have domestic car manufacturing industries, are benefiting from the influx of affordable Chinese EVs. In contrast, Japan, also affected by Chinese competition, is focusing on innovation rather than protectionism, with automakers like Nissan and Honda collaborating to develop competitive EVs.
The U.S.’s current approach, focusing on tariffs rather than innovation, risks handing global EV dominance to China, leaving American consumers with fewer affordable options and slowing the country’s progress in reducing carbon emissions.