Summary
– EU would need to impose tariffs of 50% on Chinese electric vehicles to deter imports
– Current EU tariffs on EVs from China is 10%
– Analysis suggests EU may impose duties in the 15-30% range, may not be enough to deter Chinese carmakers
– Chinese EV exports to Europe are highly profitable due to cost advantages
– Chinese EV market share in the EU is projected to rise to 20% by 2027, leading to concerns for domestic producers and potential tariffs from the EU
Article
The EU is facing a surge in imports of cheap Chinese electric vehicles, prompting the need for potential tariffs of up to 50% to deter Chinese carmakers. A recent analysis by the Rhodium Group suggests that even duties in the 15-30% range may not be enough to dissuade Chinese exporters from flooding the European market with their electric cars. The report highlights that punitive duties in the 40-50% range, or even higher for certain manufacturers like BYD, would be necessary to make the European market unattractive for Chinese electric vehicle exporters.
For example, BYD’s Seal U is sold for €20,500 in China and €42,000 in the EU, with a profit of €1,300 and €14,300 respectively. Even with the current 10% EU tariff, Chinese manufacturers are still able to generate significant profits by exporting electric vehicles to Europe. The report suggests that a 30% duty may not be enough to deter Chinese exporters, as they could still maintain a significant profit margin compared to their domestic market, making exports to Europe highly attractive for Chinese EV models.
The European Commission initiated an anti-subsidy investigation into Chinese electric vehicles in response to the surge in imports from China, which is threatening domestic producers in the EU. The market share of Chinese brands has risen to 8% in 2023 and is expected to increase further in the coming years, posing a threat to European and US carmakers as well. The investigation is expected to conclude soon, with preliminary duties potentially being imposed by May.
Chinese carmakers like BYD have significantly expanded their production capacity in China, making export crucial for their business. With an annual production capacity expected to reach 6.6mn EVs by 2026, Chinese manufacturers are under pressure to export their vehicles to maintain profitability. This has led to a significant increase in imports of Chinese electric vehicles into the EU, prompting the need for potential punitive duties to protect domestic industry.
The EU officials have indicated that preliminary duties could be imposed as early as May, with permanent duties requiring the support of a majority of EU member states. Chinese carmakers have cooperated with the investigation, but the potential tariffs could have a significant impact on their exports to the EU. The EU may also consider other ways to protect its domestic industry, such as restricting Chinese imports on security grounds or focusing consumer subsidies on EU-made electric vehicle models.
Overall, the surge in imports of Chinese electric vehicles poses a challenge to the European market, prompting the need for potential tariffs to stem the flow of cheap Chinese electric cars into the EU. The investigation by the European Commission is expected to conclude soon, with punitive duties likely to be imposed to protect domestic producers switching to electric vehicles. Chinese carmakers, which have significantly expanded their production capacity in China, are under pressure to export their vehicles to maintain profitability, making the EU a key market for their electric vehicles.
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