Increased Trump tariffs might benefit Chinese electric vehicles in European markets

Increased Trump tariffs might benefit Chinese electric vehicles in European markets - here's the explanation

In the dynamic world of international trade, the European Union (EU) and China have been making significant strides in their relationship, particularly in the realm of electric vehicles (EVs).

Last month, both parties agreed to resume trade talks, a move driven by victims of Trump's tariffs who are seeking to increase trade among each other. This renewed dialogue comes as China was the destination for 10% of China's EV exports in 2024, and 10% of EVs registered in the EU were Chinese during the same year.

The outcome of these talks, however, has not yet been finalized. One potential outcome could be the implementation of minimum pricing on Chinese BEVs in the EU. This strategy, an alternative to the tariffs that are still in place, could allow Chinese manufacturers to grow their market share in the EU.

The EU is considering this approach due to the potential benefits it could bring. For one, it would protect European manufacturers and help the EU economy, while also benefiting Chinese manufacturers. This approach could also stabilize or moderately grow the market share of Chinese BEVs in Europe, which currently stands at about 5%.

If a minimum price agreement is reached, it is likely to have two components: setting a floor price for Chinese BEVs and encouraging Chinese investment in EU-based production facilities. This would not only help balance competition but also allow Chinese BEVs to expand their presence due to cost and supply chain advantages.

The future projections for Chinese BEV market share in the EU are shaky and uncertain, but some projections suggest that it could be up to 25% by 2035. Even more optimistic projections suggest that Chinese BEV market share could be between 15% and 20% as early as 2028.

The trade war between the U.S. and the rest of the world, particularly the tariffs, could continue, which would likely lead to a resolution of the EU-China trade war. If this trade war persists, consumers and corporate fleets in the EU could benefit from better access to cheaper Chinese BEVs.

However, it's important to note that consumers would still pay a higher price for imported vehicles under minimum pricing compared to the current tariff regime. But the difference would be smaller, making Chinese BEVs more accessible to a wider market.

In conclusion, the future of Chinese EV exports to the EU is a complex issue, influenced by a myriad of factors. The renewed trade talks between the EU and China, the potential implementation of minimum pricing, and the ongoing trade war between the U.S. and the rest of the world are all key elements that will shape the landscape of the EV market in the EU in the coming years.

Increased Trump tariffs might benefit Chinese electric vehicles in European markets - here's the explanation