EU slaps new tariffs on Chinese electric cars

The European Union has implemented increased tariffs on Chinese electric vehicles (EVs) as part of measures to safeguard the bloc's motor industry. These new tariffs, ranging from 17.4% to 37.6%, will be imposed on top of the existing 10% duty on all imported electric cars from China. Consequently, the price of EVs may rise across the EU, potentially affecting their affordability for European consumers. This is prepared by SSP.

The move also deals a significant blow to Beijing, further adding to its ongoing trade strife with Washington. China heavily relies on the EU as its largest overseas market for EVs, with ambitions of bolstering its economy via high-tech products. However, EU officials claim that unfair subsidization has caused an influx of Chinese EV imports, resulting in lower prices compared to those produced within the bloc.

China has staunchly denied such allegations previously put forth by the US and the EU, contending that suspicions of subsidized excess production driving cheap imports into western markets are unfounded.

While the new tariffs come into effect provisionally on Friday, they are unlikely to be officially imposed until later this year. The charges are currently subjected to an ongoing investigation into potential state support for Chinese EV manufacturers.

Notably, this trade dispute affects not only Chinese brands, but also Western companies producing cars in China, as they, too, come under Brussels' scrutiny.

Aside from rectifying what Brussels deems a distorted market, the EU's decision carries substantial weight due to Chinese EVs being more prevalent within the bloc, compared to the relatively low presence in the US. Chinese brand EV sales within the EU surged from 0.4% in 2019 to almost 8% in 2020, according to Transport and Environment (T&E), an influential Brussels-based green group.

The winners and losers in this trade dispute are not limited to Chinese manufacturers alone. Companies exporting cars to the EU from China, including joint ventures, as well as EU carmakers with Chinese production facilities, will also face increased costs.

The European Commission has set individual tariffs based on estimates of state aid received by each firm. Cooperating with the probe granted some companies reduced duties, while others saw higher tariffs. SAIC, BYD, and Geely, three major Chinese EV brands, are subject to specific tariffs. SAIC, hit with the highest rate at 37.6%, will see significant revenue reductions due to its heavy reliance on EV sales in Europe.

BYD, on the other hand, faces a relatively lower increase of 17.4%, potentially giving them an advantage in the European market, according to research by Dutch bank ING.

Geely, the owner of Sweden's Volvo, will be subject to an additional tariff of 19.9%, significantly impacting its profits but still allowing it to export to the EU lucratively.

Tesla, the largest exporter of Chinese-made EVs to Europe, has requested an individually calculated rate, dependent on the investigation's completion.

Regardless, the company has warned that prices for its Shanghai-made Model 3 may rise due to these tariffs.

Consequently, Chinese EV firms are strategizing ways to mitigate the impact. BYD has made significant progress in establishing its first European factory in Hungary, expected to commence production in late 2022. Similarly, Chery has partnered with a Spanish firm to produce EVs and other vehicles in Barcelona. SAIC is actively seeking a site for its first European factory.

These investments in European production plants signal an attempt to reduce costs related to shipping from China while safeguarding against new duties.

The EU's move aims to curtail the high number of Chinese-made EVs entering the region, alleviating pressure on local manufacturers. Accordingly, European-based producers with minimal exposure to China, such as Renault, will benefit the most.

Ultimately, the EU tariffs impede China's EV industry further, hurting its capacity to recuperate losses resulting from its domestic price competition, which primarily targets exports.

Meanwhile, China, grappling with an economic slowdown exacerbated by the pandemic and a property crisis, aims to utilize exports as a catalyst for recovery. EVs form a substantial part of Beijing's broader strategy to stimulate economic growth, alongside renewable energy and battery exportation.

However, the imposition of tariffs and other trade barriers by the US, EU, and other major markets signals a potentially contentious road ahead for China's electrification ambitions, deepening trade tensions with critical trading partners.