Many governments are employing a carrot-and-stick approach to EV development. While incentives are crucial for attracting manufacturers, they are also using tariffs to safeguard their domestic EV industries.

A prime example is Canada, which recently followed the lead of the U.S. and European Union by imposing a 100% tariff on imports of China-made EVs.

The move aims to create a level playing field for Canadian EV producers to compete domestically and globally.

In contrast, Thailand, a member of the ASEAN Free Trade Area (AFTA), has eliminated tariffs for EVs and other goods originating within the region.

This allows Thailand to leverage the trade agreement to manufacture and export 'made-in-Thailand' EVs, even if they have a significant Chinese component, provided they meet the 40% local content requirement, Ignatiadis explains.

"The choice between incentives and tariffs can vary depending on a country's specific needs and its position in the EV supply chain," he says. "As countries progress and reach saturation, they may adjust their incentive programs and tariffs accordingly."

Tariffs, while intended to protect domestic industries, can also have unintended consequences, according to Guevarra.

“They can make protected domestic markets less competitive and innovative, ultimately leading to more expensive and potentially inferior EVs,” he says.