Europe may have to impose tariffs of up to 55%

The European Union will have to impose higher than expected customs duties, of up to 55%, on Chinese electric vehicles to curb the phenomenon. their imports into the bloc, according to a new analysis by Rhodium Group.

The findings, published on Monday, come amid the EU’s ongoing anti-subsidy investigation into electric vehicle imports from China.

Rhodium Group, which expects the EU to impose tariffs of around 15-30% on Chinese electric vehicles, said the tariffs would likely not be enough to control Chinese competition .

“Even if the duties are at the upper end of this range, some China-based producers will still be able to generate comfortable profit margins on the cars they export to Europe due to the substantial benefits they enjoy “, the report said.

Chinese companies such as BYD, which toppled Tesla to become the world’s largest electric vehicle maker last year, can sell cars at much higher prices and profit margins in regions like the EU compared to the internal market, despite paying a 10% duty rate. Chinese electric vehicle manufacturers are engaged in an intense price war in their domestic market.

BYD’s Seal U model, sold for 20,500 euros in China and 42,000 euros in the EU, generates an estimated profit of 1,300 euros in its domestic market, compared to 14,300 euros per car in Europe, Rhodium said. Even after 30% tariffs, a company like BYD will make higher profits in the EU, he adds.

The report said BYD will likely need to reduce prices to achieve its goal of gaining more market share in the EU. A tariff rate of 30% would still leave enough room to achieve this.

“Much higher duties, of the order of 45%, or even 55% for highly competitive producers like BYD, would likely be necessary in order to make exports to the European market commercially unattractive,” the report said.

The European Commission, the EU’s executive body, launched an investigation into Chinese electric vehicles and their subsidies last year, with officials saying a flood of cheap vehicles threatened domestic producers.

According to some experts, incentives implemented in China in the early 2010s led to a sharp increase in the number of startups and an increase in battery cell capacity in the country, paving the way for competitive and affordable electric vehicles to take place in the country. worldwide.

Chinese electric vehicle makers have already faced resistance from the United States amid high tariffs and political opposition, making the European market more important for companies such as BYD as they continue their global expansion .

Electric vehicles from Chinese companies are expected to account for 11% of the EU market in 2024 and could reach 20% by 2027, according to an analysis by the European Federation of Transport and the Environment.

If vehicles made in China and sourced from non-Chinese companies are taken into account, this figure is expected to exceed 25% this year.

Electric vehicle imports from non-Chinese companies could also face an EU subsidy investigation, with Rhodium estimating that tariffs of 15-30% could wipe out the business of foreign players such like BMW or Tesla who ship cars from China.

In response to political risks, electric vehicle makers have worked to shift manufacturing to Europe. BYD plans to build a factory in Hungary.

However, Rhodium adds that Brussels could use other means to protect the European electric vehicle industry, such as restricting Chinese imports for national security reasons or increasing consumer subsidies for vehicles manufactured in the EU.

The Chinese government has called the investigation into EU subsidies “blatant protectionism”, arguing that its companies are simply more competitive than their Western counterparts.