Chinese electric car makers hit with new European Union tariffs

As Brussels takes steps to protect the bloc’s engine industry, tariffs have been increased by the European Union on Chinese energy vehicles.

The new tariffs, which are applicable to individual manufacturers, go from 17.4 % to 37.6 %, which is in addition to the 10 % duty that was already in place for all electric cars imported from China.

This could cause EV prices to rise across the EU, making them less inexpensive for Western consumers.

The shift is also a big blow for Beijing, which is already in a business war with Washington. China’s Vehicle industry is relying on high-tech products to revive its ailing economy because the EU is the largest international market for its EV sector.

According to EU officials, “unfair subsidization” led to this increase in imports, which made it possible to sell China-made electric vehicles at much lower prices than those produced in the alliance.

Beijing is subsidizing excessive production to flood eastern markets with cheap imports, China has refuted this claim repeatedly made by the US and the EU.

The new claims will become effective on Friday, but they are only preliminary as the exploration into Chinese express support for EV manufacturers drags on.

So who are the possible winners and losers in this industry dispute?

Not only Chinese brands are impacted by the shift. European automakers that are produced in China have also been subject to scrutiny by Brussels.

Brussels claims that by imposing taxes, it is attempting to right what it perceives as a twisted industry. The EU’s choice may seem unimpressive in comparison to the current US decision to increase its overall tariffs to 100 %, but it has potential to have a much bigger impact. Foreign electric vehicles are more prevalent in the EU than they are on American roads.

According to figures from the influentive Brussels-based green group Transport and Environment ( T&amp, E), the number of EVs sold by Chinese brands across the EU increased from just 0.4 % of the total EV market in 2019 to almost 8 % last year.

Patryk Krupcala, an engineer from Poland, who expects to taking delivery of a brand new China- made MG4 in two months told the BBC:” I have chosen an MG4 because it is quite low. It has rear-wheel drive like my past car, the BMW E46, and is a truly quick car.

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

However, not all Chinese-made electric vehicles will suffer the same fate as a result of the fresh taxes.

They were based on estimates of how much position aid each company received, while those who cooperated with the investigation saw the tasks they were subject to reduced. The German Commission has established specific tasks for three Chinese EV models based on these criteria: SAIC, BYD, and Geely.

SAIC has been hit with the highest new tariff of 37.6%. State-owned SAIC is the Chinese partner of Volkswagen and General Motors. It also owns MG, which produces one of the top-selling EVs in Europe, the MG4.

” The price for not cooperating is a serious blow to SAIC, which gets 15.4 % of its global revenues from EV revenue in Europe”, says Rhodium Group, an independent research company.

For Mr Krupcala, who bought his MG4 before the tariffs hit, the EU’s move does not matter much:” I do n’t really care about the tariffs. I have a good car with a seven- time warranty”.

For China’s largest Vehicle manufacturer, BYD, it is a different story, as it faces an extra work of 17.4 % on the cars it boats from China to the EU.

That is the lowest improve, and it will “give the manufacturer an advantage in the Western market,” according to research from Dutch bank ING.

Cost was one of the deciding factors when Lus Filipe Costa, a Portuguese professional in the healthcare sector, said when he made his choice for his new car.

He continued, however, that even if the new levies had already been in position, he would still have chosen BYD because “other companies would also be affected.”

Geely, which owns Sweden’s Volvo, will see an extra price of 19.9 %.

According to Spanish lender BBVA, the firm will” still export to the EU effectively” but “its gains will be considerably reduced”.

Different businesses will also have to spend more to import energy cars into the EU, including European car manufacturers that have factories in China or through joint ventures.

Those deemed to have cooperated with the probe will face an extra duty of 20.8%, while those EU investigators see as non-cooperative will pay the higher tariff of 37.6%.

Tesla, the largest producer of electric cars from China to Europe, has requested an independently calculated rate, which EU officials have stated may be determined at the conclusion of the analysis.

The company has posted a warning on some of its European sites warning that the new tariffs could cause costs for its Shanghai-made Model 3.

Next month, business Lars Koopmann, who lives in the motor industry superpower that is Germany, bought a China- made Tesla Model Y.

Mr Koopmann says he especially enjoyed the car’s higher- technology features, such as the big touch screen.

According to Mr. Koopmann,” Price was even a large element that set it apart from superior German brands.”

” If the taxes had been in place, they would have always affected my decision”.

Although some China-based manufacturers will be in better shape than others, it is obvious from the Western Commission’s programs that all of them will be paying higher transport costs.

The hardest hit, according to Rhodium, may be SAIC companies like MG as well as joint initiatives between foreign and Chinese companies in China, which frequently have lower profit margins on the vehicles they sell to Europe.

” The biggest beneficiaries of the jobs are European-based producers with minimal exposure to China, such as Renault,” according to the statement.

In other words, the responsibilities are likely to accomplish what the Union hopes they will reduce the number of imported Chinese electric vehicles, thereby reducing the burden on local manufacturers.

Another benefit of the move is that some large Chinese electric vehicle companies intend to establish production in the EU, which may protect them from the new responsibilities.

Production is anticipated to start at BYD’s second Continental shop by the end of the year in Hungary.

Chinese automaker Chery just signed a joint venture agreement with a Spanish company that will see the two companies producing Batteries and other car types in Barcelona.

Additionally, SAIC is looking to find a location in Europe for its first shop.

According to Bill Russo from Shanghai-based consulting team Automobility,” It’s a well architected strategy to promote businesses to move their investments to the EU, rather than rely on exporting from China.”

The fact that some businesses are taxed more heavily than others indicates that they will increase or decrease the fine based on the level of investment the company makes in the EU.

Early on, the Chinese government placed a bet on EVs.

According to the Center for Strategic and International Studies, between 2009 and 2023 more than$ 230bn ( £181bn ) of state support was pumped into the industry.

In consequence, its EV sector has grown to be the most successful worldwide.

According to the International Energy Agency, China sold more than 60 % of all new electric vehicles globally last year.

While the vast majority of EVs produced in China are sold domestically, overseas markets, and particularly Europe, have become increasingly important.

” Exports are the profitable segment”, said Rhodium’s senior analyst, Gregor Sebastian.

Because these exports help China recover from its domestic price war, the EU tariffs will hurt the country’s electric vehicle industry.

In the wake of the pandemic and an ongoing property crisis, the second-largest economy in the world is having trouble adjusting to the effects of the pandemic.

China is trying to “export its way out” of the slump, according to Alicia Garcia- Herrero, chief economist for the Asia Pacific region at investment bank Natixis.

And Beijing is placing yet another significant bet on electric vehicles by designating the sector as one of its” New Three” growth drivers, a government strategy for revitalizing the economy that also depends on battery exports and renewable energy.

However, it appears that China’s most recent move could increase trade tensions with some of its largest trading partners as major markets like the US, the EU, and others start imposing tariffs and other barriers.