Last month, the EU announced its intention to introduce provisional tariffs on Chinese-made EVs, these tariffs will now come into effect on the 5th of July. This decision followed an investigation that provisionally concluded “electric vehicle value chains in China benefit from unfair subsidies which is causing a threat of economic injury to EU BEV producers”. The EU now joins the ranks of the US, Brazil, and India, which all have import tariffs targeting Chinese-made EVs.

EU Tariffs on Chinese made EVs Kick in

A recap of the tariffs

The previously announced tariffs meant key Chinese OEMs such as BYD, Geely, and SAIC would be subject to additional import duties of 17.4%, 20%, and 38.1%, respectively. OEMs that cooperated in the investigation but were not sampled faced a blanket 21% tariff, while those that did not cooperate faced a 38.1% tariff.

Now that the tariffs have come into force, they have been slightly reduced. SAIC and Geely are subject to additional tariffs of 37.6% and 19.9%, respectively, while cooperating OEMs face an additional 20.8% tariff. The majority of Chinese-made EVs sold in Europe fall into this bracket. BYD’s tariff remains unchanged at an additional 17.4%.

China’s reaction

On the 18th of June, in reaction to the provisional conclusion of the EU’s EV subsidy investigation, China launched a retaliatory anti-dumping probe on EU pork imports. However, on the 22nd of June, negotiations between China and the EU commenced. These talks are ongoing, with President Xi commenting on the 4th of July that China is “committed to developing the China-EU comprehensive strategic partnership”.

Rho’s Evaluation, What is the immediate impact of these tariffs?

The tariff only applies to BEVs arriving at EU ports from the 5th of July, meaning that Chinese inventory already imported into Europe under the current 10% tariffs will not be subject to the price rises. The average lead time from a vehicle being imported to collection by the end user is up to two months, therefore we don’t expect consumers to feel the effect of tariffs immediately.

Chinese OEMs have been able to drive down costs, which has in turn, been favourable for their margins. Rho Motion assesses that many Chinese OEMs, even with higher tariffs, will therefore be able to absorb the tariff price rises.

Additionally, since the tariffs only affect BEVs, consumers might be pushed towards purchasing PHEVs, which may be more affordable under lower tariffs.

Looking to the future, potential scenarios

Considering that in 2023, nearly 500,000 EVs were imported into the EU from China, at a 10% import tariff, this raised the bloc EUR2 billion. If import volumes remain similar, these more stringent tariffs could raise the bloc a further EUR5 billion per year.

However further discussions and negotiations may lead to further tariff changes, potentially making them more lenient in coming weeks and months. In October, as the EU anti-subsidy probe comes to an end, the EU Commission will vote on whether these tariffs should become permanent.

The decision could be blocked if a “qualified majority” of at least 15 countries, representing 65% of the EU population, votes against it. France, Italy, and Spain, which together account for 40% of the population, have shown their support for the tariffs. Germany will most likely vote against the tariffs, and many other countries are still undecided. Consequently, the permanency of these tariffs remains uncertain.

Further to this, if the tariffs are approved, Chinese OEMs may face retroactively applied tariffs on imported vehicles. Back in March, reports indicated that customs agencies were instructed to start registering imports of Chinese-made EVs for this purpose.

More Information

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Sources: EU Commission

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