It’s being called the EV slowdown. It is the idea that electric vehicle sales in America are expected to either cool off or completely crash, depending on who you ask, now that the $7,500 tax credit is gone.
Some of that is indeed part of a natural reality check, as it turns out not all new-car buyers in the U.S. are just ready to quit gasoline cold-turkey by the end of the decade. And it is certainly true that many automakers who were struggling to make profitable EVs are using this situation—and the total lack of fuel economy rules anymore—to pivot to gas engines and hybrids, at least for now.
But there’s another, less-discussed element to any slowing of EV investments right now, and it starts with a “T.”
That kicks off this midweek edition of Critical Materials, our morning roundup of industry and technology news that’s also coming to your inbox soon. Thanks for signing up! Click the link above if you haven’t yet, we expect to launch the newsletter very soon.
Also on deck today: has advanced safety tech made cars too expensive? Senate Republicans think so. And Volkswagen highlights a key reason for building cars in China, for Chinese buyers. Let’s dig in.
30%: Tariff Turmoil At Kia May Threaten EV4, EV Pickup Truck
Kia Tasman Weekender concept
Photo by: Kia
For a while, I’ve been saying the obvious: whoever first figures out a Toyota Tacoma-sized EV truck with decent range for the U.S. market is going to print money. Especially if the pricing isn’t outrageous. But that’s looking less and less likely to be the reported electric Kia Tasman variant, and tariffs old and new are to blame.
At last week’s LA Auto Show, Kia America’s VP of marketing, Russell Wager, spoke to us as well as Car and Driver. And he told the magazine that tariff costs are a huge part of why the Korean automaker is retooling all of its current plans. For many years, the tariff rate on South Korean imports stood at zero. Under President Donald Trump, they shot up to 25% most of this year, and now it’s down to 15%, the same as it is for Japan and Europe.
That means they’re playing a different ball game now, and as I speculated before, it’s why the affordable Kia EV4 sedan is a no-go for the U.S. now. From C&D:
But as a top U.S. executive of the Korean brand explained to Car and Driver this past week at the Los Angeles auto show, unease over Kia’s upcoming EVs is only a portion of the tariff-related turmoil it faces this year that might reshape product lineup and pricing.
We asked Kia America VP of marketing Russell Wager to get a little more specific about what’s behind the indefinite delay on the EV4 confirmed in October for what it had termed changing market conditions. Standing alongside the debut of a sharp new Telluride SUV lineup at the show, Wager quipped: “Can you give me the answer of when the tariffs are going to be resolved in Mexico, Canada, and Seoul? If you give me that answer, I’ll be as specific as possible.”
[…] Part of the issue is that they can’t currently know where EV demand will settle. The U.S. EV market had been growing steadily, up to about 10 percent prior to the ending of the EV tax credit; but Kia saw just 4 percent last month. Wager said he doesn’t think we’ll see a true indicator until February or March 2026 because the end of the tax credit may have pulled some shoppers six months forward.
Wager said that if they can get to a stable tariff situation, the case for the EV4 will be reevaluated. “At that point in time we look at it and say, are we at 25 [percent], are we at 15—and then we can build our business case. It was originally designed and engineered when the tariffs were zero percent.“
Emphasis mine there. And Wager added that while Kia previously announced an electric truck for the U.S. market—presumed to be derived from the Kia Tasman sold elsewhere in the world—that plan is also back to the drawing board. That truck would face 15%-25% tariffs plus the existing Chicken Tax, so it’s kind of a no-go.
C&D’s article is worth a read in full. But let’s unpack this a bit more here.
It’s true that Korea’s Hyundai Motor Group builds a lot of cars in America, its largest and most important global market. It now has a giant plant in Georgia meant to make EVs and hybrids. But it has nowhere near the vast American manufacturing footprint as, say, Toyota. And that almost doesn’t matter. Toyota is still looking at a $9 billion tariff bill in the current financial year. Ford Motor, which makes 80% of its cars in the U.S., is looking at $2 billion in annual tariff costs.
And Hyundai and Kia? That’s $1.24 billion and $835 million in just the third quarter. Even U.S. production still means sourcing foreign parts and incurring serious tariff costs.
When you think of the increased costs of developing EVs and batteries, and making both more affordable, it’s no wonder that carmakers have to put their eggs in other, more profitable baskets—even if they happen to make those cars in America. It’s not just the lack of tax credits that’s hurting electric momentum now.
60%: Are Safety Features Making New Cars Too Expensive?
RAV4 Safety
Photo by: Ralph Hermens
But it’s not fair or accurate to blame the skyrocketing costs of new cars just on tariffs. That had been happening since around the pandemic. Is it outright corporate greed, or just too many required safety features on new vehicles? That’s what Senate Republicans aim to say at a hearing in January, according to the Wall Street Journal:
Senate Republicans in January plan to criticize requirements for safety technology, such as automatic emergency braking and alarms to remind drivers that a child is in the back seat, arguing they are ineffective and will unnecessarily drive up the cost of cars, according to people familiar with the situation.
Chief executives of Detroit’s three automakers and a senior Tesla executive have been summoned to appear at a hearing of the Senate Committee on Commerce, Science and Transportation—set for Jan. 14—to explain why vehicles have become so expensive. General Motors and Ford Motor are weighing whether to send their CEOs to the hearing, spokespeople said; Jeep-maker Stellantis declined to comment.
Sticker shock is hitting car buyers as the U.S. broadly faces what many consider to be a growing affordability crisis. The average price of a new vehicle hit $50,000 this fall, up from closer to $38,000 before the coronavirus pandemic. Meanwhile, all facets of car ownership—from repairs to loans to insurance—have become costlier.
“Americans have been clear that they are hyper-focused on affordability,” Sen. Ted Cruz (R., Texas), who chairs the committee, said in announcing the hearing.
The story says that Republicans on the committee aim to say that seat belts and vehicle crashworthiness have done the most to improve safety, but that happened decades ago, and the results have been diminishing since. About 40,000 people in America die in traffic crashes each year. Automakers and their lobbying groups have long complained about safety tech requirements they feel are onerous, but there are other reasons for rising vehicle costs as well, including the shift to large trucks and SUVs in America, inflation, a need to invest in new technologies, and so on.
I do wonder how they’ll square this with their desire to advance autonomous vehicles in America, which presumably will need advanced safety features so they don’t add to that death toll.
90%: Volkswagen’s China Strategy Cuts Costs
Volkswagen ID. Evo, ID. Aura and ID. Era Concepts
Photo by: Patrick George
Meanwhile, automakers know they have to find some way to stay ahead of the likes of BYD and the other Chinese firms. And for Volkswagen, that means running a Chinese automaker playbook. So far, it seems to be working. From Bloomberg:
Volkswagen AG said it will be able to slash electric vehicle development costs in China by as much as 50% for some models, bolstering the German automaker’s efforts to catch up with fast-moving local rivals such as BYD Co.
The manufacturer’s new €2.5 billion ($2.9 billion) test center in Hefei is enabling the reduction by integrating software, hardware and vehicle validation under one roof, VW said Tuesday. The efficiency gains, which also include 30% faster development, are measured against an older local EV platform. They’re possible in individual projects like one focusing on compact cars for the Chinese market.
“Our customers here expect rapid innovation and flawless quality,” said Ralf Brandstätter, who oversees the automaker’s Chinese operations.
Volkswagen is launching a range of “by-China, for-China” EVs and hybrids using local automaker partners for help. But I wonder if these manufacturing techniques could be imported to the West to cut production costs on other cars, too.
100%: What Safety Systems Are You Willing To Live Without?
Rivian R1T gets Top Safety Pick+ rating from the IIHS
Photo by: YouTube
It feels dubious at best that safety tech is why new cars are so expensive. But it begs the question: what can we live without, then? I’ve gotten pretty spoiled by backup cameras in new cars. And automatic emergency braking systems are pretty proven to save lives. So if we’re cutting costs, what are we willing to sacrifice? Drop your thoughts in the comments.
Contact the author: patrick.george@insideevs.com
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