The European Union has announced additional tariffs on electric vehicles (EV) imported from China after months of investigation, citing Beijing’s unfair support for companies that undercut European carmakers. The new tariffs, ranging between 17.4% and 38.1% on top of the existing 10% duty, are a significant blow to Chinese EV producers and the Chinese government, which had lobbied hard against these taxes.
Impact on Chinese EV Makers
The tariffs’ impact will vary across Chinese EV makers, depending on each company’s cost structure and the level of tariff imposed. Companies facing the highest tariffs may need to raise prices or consider establishing factories in Europe. Despite the tariffs, BYD, a leading Chinese EV manufacturer, is expected to continue its expansion in Europe. Gregor Sebastian, a senior analyst with the Rhodium Group, suggests that BYD could emerge as a relative "winner" because it faces the lowest additional levy of 17.4%.
“BYD is already building a factory in Europe and can still profitably export to the EU even with the 17% duties. It can also export plug-in hybrids without additional duties,” said Sebastian.
Significance of the European Market
Europe is crucial for China’s EV ambitions, having overtaken Asia as China’s largest EV export market in 2021. In 2023, the EU accounted for 38% of China’s EV exports. This market's significance means that even with the new tariffs, Chinese EV manufacturers, particularly BYD, will remain focused on Europe.
Strategic Responses from Chinese EV Makers
Chinese EV companies are likely to accelerate their efforts to set up factories within Europe to circumvent these tariffs. BYD announced in December that it would build an EV factory in Hungary, becoming the first major Chinese automaker to manufacture passenger cars in Europe.
Broader Trade Implications
Despite Beijing’s displeasure with the tariffs, analysts believe a full-blown trade war with the EU is unlikely due to mutual economic dependencies. The situation remains fluid, with the tariffs set to be implemented on July 4 if no agreement is reached between the EU and Chinese authorities. Analysts like Etienne Soula from the Alliance for Securing Democracy suggest that China may wait to retaliate fully, considering the internal economic pressures and the potential for EU countries to mitigate the tariffs’ severity.
Market Dynamics and Future Prospects
BYD’s ability to navigate the new tariffs and continue its growth in Europe highlights the resilience and strategic planning of leading Chinese EV manufacturers. The establishment of more Chinese EV manufacturing plants in Europe will likely lead to increased competition and potential disruptions within the European auto industry.
Source: edition.cnn.com