Chinese Electric Vehicles Remain Competitive in Europe Despite EU Tariffs
Chinese electric vehicle (EV) manufacturers are continuing to make inroads into the European market, despite the European Union’s (EU) recent imposition of additional tariffs on autos made in China. While the tariffs, initially proposed at much higher rates, have been revised lower, concerns remain about their impact on the industry.
Key Takeaways:
- EU tariffs on Chinese EVs, while revised lower, still present a hurdle but not a barrier to entry, according to industry experts.
- Chinese EV makers like BYD are offering competitive prices with models like the Dolphin, priced at less than $21,550, significantly lower than the cheapest Tesla Model 3.
- European automakers are responding by developing their own low-cost EVs, like Volkswagen’s planned $21,476 entry-level EV.
- The possibility of retaliatory tariffs from China remains a significant concern.
EU Tariffs: Hurdle or Barrier?
The EU’s revised tariffs, which saw BYD’s tariffs reduced to 17% from 17.4%, Geely to 19.3% from 19.9%, and SAIC to 36.3% from 37.6%, are still considered a hurdle for Chinese EV makers. However, research group Rhodium found that to truly deter exports, tariffs would need to be as high as 50%, potentially even higher for vertically integrated manufacturers like BYD.
"Tariffs on Chinese-made EVs will create a hurdle, but not a barrier to entry," said Joseph McCabe, president and CEO of AutoForecast Solutions, who pointed out that the EU’s tariffs are less severe than the 100% tariff announced by the US in May.
McCabe also stressed that the European and Chinese OEMs (original equipment manufacturers) are heavily interconnected, making imposing high tariffs a delicate balance between promoting domestic production and maintaining international operational relationships.
Staying Ahead of the Curve: Price Competitiveness and Innovation
Chinese EV makers aren’t backing down, even with the tariffs in place.
BYD has already made its mark in the European market with its Dolphin model, a rebranded version of the Seagull model, which is priced at less than $21,550. This significantly undercuts the Tesla Model 3, the cheapest offering from a Western EV maker, which is currently being sold for $44,480 in the UK.
Even with the 17% levy, the BYD Dolphin will still be about $23,270 cheaper than the imported Tesla Model 3, illustrating the competitive pricing advantage Chinese manufacturers hold.
In response, German automaker Volkswagen has announced plans to develop a low-cost electric vehicle for the European market at a comparable price of around $21,476 by 2027.
"Now, profitability takes a back seat to market share," said McCabe, noting that the investment community is focused on the potential of new, innovative EV players rather than short-term financial performance.
Retaliatory Tariffs: A Potential Trade War?
While the EU’s tariffs aim to promote European EV production, McCabe warned that if the Chinese OEM sector is significantly affected, retaliatory tariffs from China against Europe could easily follow.
"If they really have to kill the EV industry in China, they have to put in 300% of tariffs … which, you know, doesn’t make sense from my perspective," William Ma, CIO of GROW Investment Group, told CNBC’s Street Signs Asia.
The EU’s tariff discussions began in June as a direct response to what it deemed "unfair subsidies" to Chinese EV makers, posing a threat to European companies.
"This geopolitical or sanction will not go away easily for the next year or two," Ma said.
The Future of Chinese EVs in Europe
The future of Chinese electric vehicles in Europe remains uncertain, with the EU’s tariffs serving as a key point of contention. While Chinese manufacturers are actively seeking to remain competitive through cost-efficient models and innovation, the threat of retaliatory actions from China could escalate tensions and potentially lead to a trade war. The next few years will be crucial for determining the long-term outcomes of this geopolitical chess match, with implications for both the global EV market and the broader economic landscape.
