"EU might require sky-high tariffs to impede the Chinese electric vehicle market"
The global electric vehicle (EV) market is witnessing a significant shift, with China-made EVs surging in popularity in the European Union (EU). According to recent reports, around 20% of all EVs sold in Europe in 2023 were manufactured in China, amounting to approximately 300,000 units.
Tesla, with its Shanghai Gigafactory 3, has been a major player, accounting for 28% of the sales among China-based EV manufacturers. Renault's Dacia followed in second place with 20%. Chinese brands, however, have made a notable entry into the European market, grabbing 7.9% of the market share in 2023, with BYD being the top Chinese EV manufacturer.
The increased competition in the global EV market is expected to prolong price cuts, primarily benefiting Chinese manufacturers. This trend is evident in the surge of imported EVs from China to the EU, which has grown from $1.6 billion to $11.5 billion in 2023.
Amidst this growth, the EU is contemplating imposing duties on imported EVs from China. Rhodium Group predicts that the EU may impose duties in the 15-30% range on these vehicles. However, this potential tariff may not significantly impact the profits of major Chinese EV manufacturers like BYD and Geely (through its Lynk & Co brand), as they have been strategically increasing exports of plug-in hybrid vehicles, which are not subject to EU tariffs.
The anti-subsidy inquiry against Chinese EV makers is expected to finalize in a few weeks. Despite the inquiry and potential tariffs, Chinese EVs are expected to account for 25% of the new EV sales in Europe this year.
The European Court of Auditors (ECA) has expressed concerns about achieving 2035 environmental goals if EV prices don't drop in Europe. Failing to meet the demand with local production may result in importing more EVs from the US and China.
CATL, a Chinese company, dominates the EV battery market and plans to have two gigafactories in Europe by 2030, in Hungary and Germany. This move is expected to further solidify China's position in the European EV market.
Transport & Environment (T&E) suggests that a 25% tariff on imported electric cars would be more appropriate, compared to the current 10% tariff on Chinese EVs. Rhodium Group, however, predicts that a 25-30% tariff on Chinese EVs may still result in high profits for brands like BYD. A 30% duty on Chinese EVs would result in a €4,700 EU premium compared to China profits for brands like BYD.
Despite the ongoing discussions and potential tariffs, the future of Chinese EVs in the European market looks promising. The competition is fierce, prices are dropping, and Chinese manufacturers are making strategic moves to maintain their position in this rapidly growing market.
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