Can Chinese EVs Withstand EU Tariffs? Experts Say Yes

Experts suggest that the European Union’s new tariffs may not significantly impact the import volume of Chinese electric vehicles (EVs). One such opinion stems from Matthias Schmidt of Schmidt Automotive Research, who claims Chinese car manufacturers have substantial profit margins for their EVs in Europe, which could absorb the increased tariffs without affecting consumer prices.

The European Commission is anticipated to decide on a potential tariff hike following a probe into China’s EV industry support. The decision is expected after the EU Parliament elections that’s set to end on June 9.

Another opinion from the Rhodium Group, a New York-based think tank, highlights that tariffs would need to reach 50% from the current 10% to significantly affect the market. However, they foresee a rise to around 30%, which would still allow Chinese producers to maintain profitable margins due to their cost benefits.

Although provisional tariffs could impose billions in additional costs on Chinese EV manufacturers, analysts like Schmidt believe sales in Europe may not drastically decline. Instead, the primary effect would be on the profit margins of Chinese brands, which are unable to demand higher prices than established competitors and may have to operate with slimmer profits.

Another notable opinion comes from investment bank UBS, and their analysis indicates that Chinese automakers enjoy a 30% cost advantage over EVs produced domestically in the EU. Even with tariffs increasing to 25% from 10%, a marginal profit would remain.

In 2023, approximately 300,000 Chinese-made EVs were sold in Europe, capturing a 19% market share. The Tesla Model 3 led with about 99,500 units sold. The rest of the sales were split between Chinese and non-Chinese brands, like BMW, which also manufactures cars - both EVs and non-EVs - in China for the European market.

Price comparisons between China and Germany show significant differences. For instance, BYD’s Seal U is priced at €21,769 (RM130,544) in China and €41,990 (RM251,809) in Germany; the BYD Atto 3 is tagged at €17,923 (RM107,482) in China compared to €37,990 (RM 227,830) in Germany. This substantial price difference in the EU allows BYD to adjust its pricing strategy flexibly. KR

Source: Automotive News Europe