Chinese electric car makers hit by new EU tariffs – BBC News

The European Union has raised tariffs on Chinese electric vehicles as Brussels moves to protect the bloc’s auto industry.

The new tariffs on individually manufactured products range from 17.4% to 37.6%, on top of the 10% tariff already in place on all electric cars imported from China.

This could lead to an increase in the price of electric vehicles across the EU, making them less affordable for European consumers.

The move is also a blow to Beijing, which is already locked in a trade war with Washington. The EU is the largest foreign market for China’s electric vehicle industry and the country is counting on high-tech products to revive its flagging economy.

EU officials say the surge in imports has been driven by “unfair subsidies” that have allowed Chinese-made electric vehicles to be sold at prices far below those produced in the bloc.

China has denied the repeated US and EU allegation that Beijing is subsidising excess production to flood Western markets with cheap imports.

The new charges will take effect Friday but are provisional for now, pending an investigation into Chinese state support for electric vehicle makers. They are not expected to be handed down until later this year.

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

Chinese brands are not the only ones affected by this measure. Western companies that manufacture cars in China are also in Brussels’ sights.

By imposing tariffs, Brussels says it wants to correct what it sees as a distorted market. The EU’s move may seem modest compared to the US’s recent decision to raise its tariffs to 100%, but it could have far greater consequences. Chinese electric vehicles are relatively rare on American roads, but much more common in the EU.

The number of electric vehicles sold by Chinese brands in the EU has increased from just 0.4% of the total electric vehicle market in 2019 to almost 8% last year, according to figures from the influential Brussels-based green group Transport and Environment (T&E).

Patryk Krupcala, a Polish architect who expects to receive a brand new MG4 made in China in two weeks, told the BBC: “I chose an MG4 because it’s quite cheap. It’s a very fast car and it’s rear-wheel drive like my previous car, a BMW E46.”

T&E is eyeing companies like BYD and Shanghai Automotive Industry Corporation (SAIC), the Chinese owner of the former British MG brand, could reach a market share of 20% by 2027.

But not all electric vehicles made in China will be affected equally by the new tariffs.

The taxes were calculated based on estimates of state aid received by each company, while companies that cooperated in the investigation had their duties reduced. Based on these criteria, the European Commission set individual taxes for three Chinese electric vehicle brands – SAIC, BYD and Geely.

SAIC hit by new highest tariff 37.6%. State-owned SAIC is the Chinese partner of Volkswagen and General Motors. It also owns MG, which produces one of Europe’s best-selling electric vehicles, the MG4.

“The price of not cooperating is a major blow to SAIC, which derives 15.4% of its global revenue from electric vehicle sales in Europe,” said Rhodium Group, an independent research firm.

For Mr Krupcala, who bought his MG4 before the tariffs came into force, the EU decision is of little consequence: “I don’t really care about the tariffs. I have a nice car with a seven-year warranty.”

For BYD, China’s largest electric vehicle maker, it’s a different story, as it faces an additional 17.4% duty on vehicles it ships from China to the EU.

This is the smallest increase and one that, according to a study by the Dutch bank ING, “will give the car manufacturer an advantage in the European market.”

Luís Filipe Costa, an insurance executive in Portugal who recently purchased a BYD Seal, says price was one of the deciding factors when choosing his new car.

But he added that even if the European Commission’s new tariffs had already been in place, he would still have opted for BYD because “other brands would also be affected”.

Geely, owner of Swedish automaker Volvo, will face an additional 19.9 percent tariff.

According to Spanish bank BBVA, the company “will continue to export to the EU profitably”, but “its profits will be significantly reduced”.

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

Persons deemed to have cooperated with the investigation will be required to pay an additional fee of $20.8.%while those deemed uncooperative by EU investigators will pay the highest tariff of 37.6%.

U.S.-based Tesla, China’s largest exporter of electric vehicles to Europe, has requested an individually calculated rate that EU officials say will be determined at the end of the investigation.

However, the company posted a notice on some of its European websites, saying prices for its Shanghai-made Model 3 could increase due to the new tariffs.

Last year, businessman Lars Koopmann, who lives in the auto industry giant Germany, bought a Tesla Model Y made in China.

Mr Koopmann said he particularly liked the car’s high-tech features, such as the large touchscreen.

“The price was also an important factor that differentiated it from premium German brands,” says Koopmann.

“If the tariffs had been in effect, they would still have influenced my decision.”

While some China-based exporters will be better off than others, it is clear from the European Commission’s plans that all will face higher costs when shipping to Europe.

The hardest hit “will be SAIC brands like MG… as well as joint ventures between foreign and Chinese companies in China, which often have narrower profit margins on the cars they export to Europe,” Rhodium said.

“The main beneficiaries of the customs duties are producers based in Europe, with little exposure to China, such as Renault.”

In other words, the tariffs should have the effect the EU intended: reducing the number of Chinese-made electric vehicles entering the region, thereby easing pressure on local manufacturers.

The move also has another implication: some major Chinese electric vehicle companies are planning to boost their production capacity in the EU, which could help protect them from new tariffs.

Construction work on BYD’s first European plant is well advanced in Hungary and production is expected to begin there by the end of next year.

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

SAIC is also looking to find a site for its first factory in Europe.

“It’s a well-designed plan to encourage companies to move their investments to the EU, instead of relying on exports from China,” said Bill Russo of Shanghai-based consultancy Automobility Group.

“The fact that some companies are taxed more than others is a signal that the penalty will be higher or lower depending on the degree of commitment of the company to invest in the EU.”