People look at the BYD Dolphin electric mini car during the 2023 Shenyang International Auto Show in Shenyang, Liaoning Province, China, May 3, 2023.
VCG | Visual China Group | Getty Images
Despite the EU’s additional tariffs on Chinese-made cars, especially after last month’s reduction in tariffs, Chinese electric vehicles will remain competitive in Europe.
In the latest tariff adjustments at the end of August, Chinese auto giant BYD’s tariffs were reduced from 17.4% to 17%, and Geely Auto’s tariffs were reduced from 19.9% to 19.3%. State Administration for Industry and Commerce dropped from 37.6% to 36.3%.
The Rhodium research group said that in order to make the European market unattractive to Chinese electric vehicle exporters, tariffs would have to be as high as 50%. The company said that number may need to be higher for vertically integrated manufacturers such as BYD.
Joseph McCabe, president and CEO of global automotive research firm AutoForecast Solutions, said the current tariffs will not pose a major deterrent to Chinese electric vehicle manufacturers. “Tariffs on Chinese-made electric vehicles will create obstacles but will not become a barrier to entry,” he added.
He pointed out that the EU tariffs are not as severe as those announced in North America because of the close ties between European and Chinese OEMs. In May this year, the United States announced a 100% tariff on Chinese electric vehicles. Canada followed suit last month.
“It’s a delicate balance to promote domestic production in Europe without severely impacting business in China,” McCabe said.
Despite the European Union’s efforts to restrict imports through tariffs, Chinese electric vehicle manufacturers are still launching newer, cheaper products.
At a conference in May this year, the Chinese giant BYD Announced the Dolphin model for the European market, priced at just under $21,550. This model is a rebrand of the China Seagull model.
In contrast, Western electric car maker Tesla The Model 3 is the brand’s cheapest product, priced at $44,480 in the UK. Tesla’s electric vehicles produced in China also face a 9% tariff when imported into the EU.
Even with the 17% tax, BYD’s Dolphin model will still be about $23,270 cheaper than the Tesla Model 3 imported from China.
To better compete with fierce Chinese rivals, German brand Volkswagen announced plans to develop a low-cost electric vehicle for the European market in 2027, with a comparable price of about $21,476.
“Profitability has now given way to market share,” McCabe said. “The investment community rewards new, innovative electric vehicle manufacturers based on what they promise to achieve, rather than measuring the short-term financial performance of traditional manufacturers.”
“If they really want to kill the electric vehicle industry in China, they have to impose 300% tariffs… You know, from my perspective, it doesn’t make sense,” William Ma, chief information officer of GROW Investment Group, told CNBC on Tuesday’s Asia road sign”.
McCabe warned that there was a high risk of China imposing retaliatory tariffs on Europe if its original equipment manufacturing industry was affected.
EU tariff talks began in June in response to “unfair subsidies” to Chinese electric car manufacturers, which posed a “threat of economic harm” to their European counterparts.
“This kind of geopolitics or sanctions will not disappear easily in the next year or two,” Ma said.
