During the 2023 Shenyang International Auto Show on May 3, 2023, attendees viewed a BYD Dolphin electric subcompact vehicle in Shenyang, Liaoning Province, China.
Chinese electric vehicles are expected to maintain their competitiveness in the European market despite the European Union’s revised tariffs on autos produced in China. Last month, the EU adjusted these tariffs, reducing them slightly. BYD, a leading Chinese automaker, experienced a tariff reduction from 17.4% to 17%; Geely’s tariffs were lowered from 19.9% to 19.3%, and SAIC saw a decrease from 37.6% to 36.3%.
Research group Rhodium suggested that tariffs need to be as high as 50% to substantially hinder Chinese EV exporters’ attractiveness in Europe, with even higher tariffs potentially required for vertically integrated manufacturers like BYD. However, Joseph McCabe, President and CEO of AutoForecast Solutions, asserted that the current tariffs would not pose a significant barrier to China’s EV manufacturers. He noted that while tariffs present a hurdle, they are not insurmountable.
McCabe also highlighted that the EU’s tariffs are less severe than those imposed by North America due to the strong interconnection between European and Chinese original equipment manufacturers. In May, the U.S. announced a 100% tariff on Chinese EVs, followed by Canada implementing a 100% import tariff on Chinese electric vehicles last month.
He emphasized the challenge of promoting domestic European production without adversely affecting Chinese operations. Despite the EU’s efforts to limit imports using tariffs, Chinese EV manufacturers continue to introduce newer, more affordable models to the market.
In May, BYD announced that its Dolphin model would be available to the European market for less than $21,550, rebranding it from the Chinese Seagull model. In comparison, Tesla’s Model 3, the brand’s least expensive offering, sells for $44,480 in the United Kingdom. The Tesla Model 3, imported from China, also faces a 9% tariff on imports to the EU. Despite a 17% levy, BYD’s Dolphin remains approximately $23,270 cheaper than the China-imported Tesla Model 3.
To enhance competition with Chinese rivals, Volkswagen has revealed plans to develop a low-cost electric vehicle for the European market, aiming for a comparable price of around $21,476 by 2027. According to McCabe, market share now takes precedence over profitability as the investment community favors innovative EV players based on their potential rather than short-term financial performance.
William Ma, CIO of GROW Investment Group, commented on CNBC’s “Street Signs Asia,” suggesting that extremely high tariffs, such as 300%, would be required to significantly impact the Chinese EV industry, a measure he finds unreasonable. McCabe also pointed out the high risk of retaliatory tariffs from China against Europe if the Chinese original equipment manufacturing sector is impacted.
The EU initiated tariff discussions in June as a response to alleged “unfair subsidies” to Chinese EV manufacturers, which were claimed to pose a threat to the economic stability of European EV producers. Ma indicated that these geopolitical tensions or sanctions are unlikely to be resolved in the near future.
