100% US tariffs on EVs from China! The gasoline car is a dying breed

Due to a slump in demand, Mercedes has halted the “MB.EA-Large” electric platform. This architecture was an important future project intended to electrify the next generation of the brand’s largest sedans and SUVs from 2028 onward. But even if CEO Ola Källenius has merely followed the principle of supply and demand, he cannot escape one truth: the car of the future is electric. This is shown most clearly by looking at China: there, the share of electric vehicles in the automotive market rose to 23.8% in 2023, while in Germany it reached just 4.8% at the beginning of 2024. In addition, 57% of all EVs sold worldwide come from Chinese production.

More and more of the major traditional car brands are switching to electric. In 2021, Opel announced that from 2028, like Vauxhall, it wants to be a purely electric brand. Even now, nostalgists can buy an electric Manta. Luxury brands in particular are increasingly focusing on electric drivetrains: as early as 2018, Jaguar was one of the first major brands to launch its own electric car. From 2025, there are to be no more models with internal combustion engines. Bentley—whose name is derived from the (gasoline) engines of its vehicles and which is a royal warrant holder to the British royal family—will also become a purely electric brand as early as 2030. Bentley has already discontinued all pure combustion models for 2026. Rolls-Royce and Ferrari are also following the inevitable trend and will produce only battery-electric cars from 2030 onward.

The car brands mentioned above are only a few examples. Sooner or later, all manufacturers remaining in the market will build only electric vehicles, because the end of the combustion engine is just around the corner. Let us recall: from 2035, there will be no new registrations of gasoline or diesel vehicles. This also applies to Mercedes, by the way. So far, 9 out of 10 cars produced are still gasoline or diesel, but this cannot continue. While Källenius has withdrawn the “Electric only” plan, he must know that this is not a long-term solution.

Whether the complete electrification of European cars by 2035 will succeed also depends on whether the commodities required for it are available in sufficient quantities. More than 90% of the heavy magnetic rare earths needed for electric motors, such as terbium oxide and dysprosium oxide, come from China. The risk is that the country can impose supply stops at any time in order to exert political power. At the same time, these commodities are currently very cheap. Investors can benefit from the low prices and, at the same time, help the automotive industry with electrification by bringing rare earths into the country.

Today could be the end of the low prices. Because Joe Biden has increased tariffs on electric cars from 25% to 100%. This clearly shows that he wants to give the domestic EV industry a fair chance so that it can also establish itself in the USA. The question is how China will react now. In the past, the Middle Kingdom has relied on export controls on critical raw materials in the trade war with the USA. In our view, this is also to be expected this time. In our view, the time window for low-cost purchases of technology metals such as indium and rare earths is closing right now. Therefore, our advice is: Act now!