Chinese electric car makers hit by new EU tariffs

The European Union has increased tariffs on Chinese-made electric vehicles as Brussels takes steps to protect the bloc’s auto industry.

The new tariffs on individual manufacturers range from 17.4% to 37.6% and are on top of the 10% tariff already imposed on all electric vehicles imported from China.

This could lead to higher prices for EVs across the EU, making them less affordable for European consumers.

The move would also be a major blow to Beijing, which is already locked in a trade war with the U.S. The EU is the largest overseas market for China’s electric vehicle industry, and China is relying on high-tech products to revive its struggling economy.

EU officials say the rise in imports is driven by “unfair subsidies” that allow Chinese-made EVs to be sold at much cheaper prices than those produced in the EU.

China denies repeated allegations by the United States and EU that Beijing is subsidizing excess production to flood Western markets with cheap imports.

The new charges take effect on Friday but are currently provisional as investigations into Chinese government support for domestic electric vehicle makers continue.

So who are the potential winners and losers in this trade dispute?

The move doesn’t just affect Chinese brands: Western companies that produce cars in China are also under scrutiny from Brussels.

By imposing the tariffs, the EU says it is trying to correct a distorted market. While the EU’s decision may seem mild compared to the recent U.S. move to increase tariffs to 100%, it could have a much more significant impact. While Chinese EVs are relatively rare on U.S. roads, they are far more common in the EU.

The number of EVs sold by Chinese brands across the EU rose from just 0.4% of the total EV market in 2019 to almost 8% last year, according to data from Transport & Environment, a leading Brussels-based environmental group.

Polish architect Patrick Krupkala, who is due to receive his new Chinese-made MG4 in two weeks, told the BBC: “I chose the MG4 because it’s quite cheap. It’s a very fast car and it’s rear-wheel drive, just like my old BMW E46.”

T&E project companies such as BYD and China’s Shanghai Automotive Industry Corporation (SAIC), which formerly owned British brand MG. It could reach a 20% market share by 2027.

But not all Chinese-made EVs will be affected equally by the new tariffs.

The European Commission has set separate tariffs for three Chinese EV brands: SAIC, BYD and Geely.

SAIC was hit with the highest new tariffs. 37.6%. State-owned SAIC is the Chinese partner of Volkswagen and General Motors. It also owns MG, which makes the MG4, one of Europe’s best-selling EVs.

“The cost of not cooperating would be a big blow to SAIC, which derives 15.4 percent of its global sales from EV sales in Europe,” said independent research firm Rhodium Group.

For Krupkkala, who bought his MG4 before the tariffs came into effect, the EU move isn’t a big deal: “I’m not worried about the tariffs. I have a good car with a seven-year warranty.”

It’s a different story for BYD, China’s largest EV maker, which will face an additional 17.4% tariff on vehicles it exports from China to the EU.

This is the lowest price increase ever and, according to a study by Dutch bank ING, will “give car manufacturers an advantage in the European market.”

Luiz Filipe Costa, an insurance executive in Portugal who just bought a BYD Seal, said price was one of his deciding factors when choosing a new car.

But he added that even if the European Commission’s new tariffs had already come into force, he would still have chosen BYD because “other brands are also affected.”

Geely Automobile, which owns Sweden’s Volvo, will be hit with an additional tariff of 19.9%.

Spanish bank BBVA said the company would “continue to export profitably to the EU” but that “profits will be significantly reduced.”

Other companies, including European carmakers that operate factories in China or through joint ventures, would also have to pay more to bring electric cars into the EU.

Anyone deemed to have cooperated with the investigation will be subject to a fine of 20.8.%Meanwhile, any country deemed uncooperative by EU inspectors will be subject to higher tariffs of 37.6%.

U.S.-based Tesla, the largest exporter of electric cars from China to Europe, has asked for an individually calculated tax rate, which EU authorities said would be decided at the end of the investigation.

Still, the company posted a notice on some European websites saying the price of Model 3 cars it makes in Shanghai could increase because of the new tariffs.

Last year, Lars Koopmann, a businessman living in Germany, a major auto manufacturing nation, bought a China-made Tesla Model Y.

Copeman said he particularly liked the car’s high-tech features, including the large touchscreen.

“Price was also a big differentiator from German premium brands,” Koopman says.

“If tariffs had been introduced, it would certainly have influenced my decision.”

While some China-based exporters are in a better position than others, the Commission’s plans make it clear that all will face higher costs when shipping to Europe.

“Those hardest hit will be SAIC brands such as MG and foreign-Chinese joint ventures in China, where profit margins are often lower on cars exported to Europe,” Rhodium said.

“The biggest beneficiaries of the tariffs will be Europe-based automakers with limited exposure to China, such as Renault.”

In other words, the tariffs are likely to have the effect the EU hopes of reducing the number of Chinese-made EVs entering the region and easing pressure on local manufacturers.

The move has another consequence: Some major Chinese EV companies are also planning to build production capacity in the EU, which could help them avoid new tariffs.

Construction of BYD’s first European factory in Hungary is progressing well, with production due to start by the end of next year.

Chinese automaker Chery Automobile recently signed a joint venture with a Spanish company that will see the two companies manufacture electric vehicles and other types of cars in Barcelona.

SAIC is also seeking to secure a site for its first factory in Europe.

“This is a well-thought-out plan to encourage companies to move their investments to the EU rather than relying on exports from China,” said Bill Russo of Shanghai-based consulting group AutoMobility.

“The fact that some companies are taxed more than others is a signal that penalties will be higher or lower depending on the extent to which companies invest in the EU.”