The surge of new entrants into the market for golf car-type (GCT) vehicles, particularly low speed personal transportation vehicles, has resulted in push back from what heretofore was the reigning duopoly of the industry, Club Car and E-Z-GO Textron, via a petition brought before the U.S. International Trade Commission and the U.S. Department of Commerce. Yamaha Golf Cars, while not listed on the petition, is likely to be supportive of the effort. The results of the investigation by the two government agencies will have major implications for dealers and a number of the new entrants.
Club Car and E-Z GO have formed a trade association for purposes of the petition called the American Personal Transportation Vehicle Manufacturers Coalition. The APTVMC alleges that low speed personal transportation vehicles, LSPTVs from China, are being illegally exported to the United States and causing significant injury to the domestic industry. The petition before the ITC is officially entitled, Low Speed Personal Transportation Vehicles from China; investigation number Inv. No. 701-TA-731 and 731-TA-1700. Here is the link to further information on the ITC site: https://ids.usitc.gov/case/8209/investigation/8588. Also, here is the link to the Commerce Department investigation: : Initiation of the Antidumping and Countervailing Duty Investigations of Low-Speed Personal Transportation Vehicles from China (trade.gov)
This article summarizes briefly the events leading up to the petition, which are well-known in the industry, suggests the likely progression of U.S. government actions and initiatives, and how importers might adjust their supply chain over the mid to long term, should GCTVs from China be seriously curbed by anti-dumping tariffs and/or countervailing duties imposed by the Commerce Department.
Historical background
It is useful to recount the COVID/Post COVID industry and marked development preceding the ALSPTV petition, as it provides insights into the genesis of the petition and what is at stake.
First, GCT vehicles have always had somewhat of a dual role in transportation; i.e., one of navigating golf courses and secondly, providing carriage for short distance driving for various purposes. In the first case, GCT vehicles could be owned or leased by golf courses or were privately-owned for golf course use. In the second case, GCTVs were primarily used on streets and had many of the accoutrements of conventional on-road automobiles.
In this latter case, GCTVs became known as personal transportation vehicles (PTVs).
Growing market share for PTVs
Even prior to 2021 personal transportation vehicles were a growing part of the market, both in terms of units and sales value. Data put together in its SVR’s annual industry report indicates that by 2021, PTV market value at retail surpassed the golf car segment, although the latter held the edge in units sold.
During and subsequent to COVID the PTV market surpassed the golf course segment in terms of both units and retail value. During and just after the COVID crisis, margins of PTVs increased substantially This in turn, coincided with an innovative vehicle packaging process, wherein units are partially assembled and sent to the U.S. for final assembly. These units mainly come from China, and China is the originating country focused upon by petitioners.
So, what was the secondary segment for GCTVs has become the principal segment and the one that is presently in contention today.
New entrants surge into the market
As a result of the apparent profit opportunities in the PTV segment, new entrants poured into the market over the course of the 2021-2024 period. In an economics textbook case of competitive market adjustments, the supply curve shifted rightward (lower prices, more output) and profits have declined.
Many that we spoke to at the 2024 PGA Show predicted a “race to the bottom” for prices, followed by some of the new companies withdrawing from the market. That being said, the GCT vehicle industry has dramatically changed from three companies dominating the market to an industry much closer to a purely competitive structure (many sellers, many buyers, close to standard product).
ITC/Commerce Department possible corrective action
In situations where a U.S. domestic industry is harmed by unfair foreign competition, the Department of Commerce and the U.S. International Trade Commission are empowered to review the issue and take measures to correct the problem.
So, what constitutes unfair competition? Unfair competition occurs when one of more of the following takes place:
- A foreign government is subsidizing the industry exporting the products in question, thereby allowing the foreign companies to reduce their prices on the exports;
- An exporting company or industry is charging a price in the country of destination that is below their cost of production;
- An exporting company is charging a lower price in its home country than is being assessed in the foreign market.
In the case of a subsidy, the Commerce Department can assess a countervailing duty that would, in theory, negate the unfair advantage of the foreign firm. In the two latter instances, which could be described as predatory pricing, an anti-dumping duty would be assessed. Final results and adjudication in the investigations are scheduled during the first and second quarters of 2025.
There are certain headwinds against reaching a decision favorable to the APTVMC, as indicated below.
DOJ and FTC general policy regarding competition
Both the Department of Justice and the Federal Trade Commission exercise powers of review authority over mergers and acquisitions. Long standing U.S. policy, dating to the 1890 Sherman Antitrust Act is one of encouraging competition and discouraging monopolies and monopoly creating activities, such as cartelizing an industry. In this case there is essentially a historic duopoly, previously dominating the industry, which, essentially seeks government help in supporting their competitive position.
Market gains in recent years and the influx of new companies, largely benefitting from the importation of partially-assembled units from China, have rendered the market for LSPTVs far more competitive than it previously had been. This is truly an interesting case in which government policy supporting competition runs athwart government policy protecting U.S. domestic industry against unfair competition.
In just a policy confrontation, it is likely that the ITC/Commerce policy objectives would win out. Why? Because any imposition of countervailing or anti-dumping duties would level the playing field without reducing the potential for increased competition.
Clear evidence of U.S. companies increasing value-added to the imports
At the preliminary hearing on the petition before the ITC, a wide array of companies that were benefitting from Chinese imports were in attendance. The case they make is that:
- They are not merely sales organizations but are indeed adding value to the imported unit to finish the vehicle and making it marketable;
- In addition to adding value to the manufacturing process are providing additional value to the product through servicing and supplying parts;
- They are hiring U.S. workers and may, indeed, collectively have more employees at stake than petitioner companies.
Rearranging the supply chain
The final headwind for the APTVMC is that supply chains will be rearranged such that the Coalition faces similar competition, but from different sources. These sources might be from Chinese manufacturers relocating facilities to countries in Southeast Asia, such as Malaysia or Vietnam, or even Indonesia.
Another possible rearrangement might be to locate facilities within Canada or Mexico, meet the content regulations and export to the U.S. under favorable tariff provisions of the U.S. Mexico Canada (USMC) free trade agreement.
In the long term…
In the long term competitive markets usually win out. Hopefully, the trade dispute will be resolved, the playing field leveled, and the new competitiveness continue to benefit the consumer and expand the market.
The future for low speed electric vehicles is potentially very positive and one could argue that aside from supply side challenges the real challenge is to demonstrate the effectiveness of the LSPTV in meeting market needs and contributing in a major way to addressing the climate change issue.
