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After a year-long investigation, the EU has moved forward with finalising tariffs on BEVs imported from China, solidifying an earlier provisional measure. These tariffs, effective from 31st October, will remain in place for five years, targeting Chinese manufacturers whom the EU Commission claims benefit from substantial subsidies provided by Beijing. Earlier in October, 10 EU member states voted in favour of the tariffs, while five including Germany opposed, and 12 abstained.
The Structure of Tariffs
The EU has structured the tariffs on a sliding scale rather than a blanket approach, impacting companies differently based on their cooperation with the Commission’s anti-subsidy investigations. SAIC, a company that failed to cooperate, will face the highest rate of an additional 35.3%. In contrast, Tesla has been assigned the lowest duty of an additional 7.8%. BYD and Geely will see tariffs of additional 17% and 18.8% respectively.
China’s response and potential retaliation
China has expressed strong disapproval of the tariffs, stating it “neither accepts nor agrees” with the EU’s decision and will “take all necessary measures to firmly protect the legitimate rights and interests of Chinese companies”. As part of its countermeasures, China has filed a complaint with the World Trade Organisation (WTO) and initiated anti-dumping probes into select European goods, including Conagc and EU pork products. Additionally, reports indicate Beijing may be pressuring state-owned OEMs to reconsider their European market expansion plans.
German industry concerns
Germany, along with Hungary, Malta, Slovenia, and Slovakia, voted against the tariffs, citing concerns over potential backlash from China. Key German manufacturers such as Volkswagen, Mercedes-Benz, and BMW voiced similar apprehensions, warning that tariffs could harm the European automotive sector, potentially impacting jobs and industry growth.
Will Roberts Automotive Lead at Rho Motion commented, “The EU’s desire to stem the arrival of Chinese vehicles onto its shores will help level the playing field financially compared to its domestic manufacturers. It may however already feel too late for the workers of those carmakers as multiple plants across Europe are threatened with closure from a recent fall in profits among Europe’s biggest manufacturers.”
READ: VW plans plant closures and mass layoffs, what role do EVs have to play in this?
Consumer impact and market dynamics
The tariffs arrive at a time when the European EV market faces significant pricing challenges. Currently, European BEVs carry a pricing premium over ICE vehicles.
Roberts continued, “Consumers agnostic to their vehicles origins arguably won’t win either, Chinese BEVs are largely superior to their competitors so taking prices out of reach of cost-sensitive customers will narrow the options on the table.”
Rho Motion analysis shows European EV sales for this year are expected to remain at the same levels as 2023. In the first half of 2024, just under 25% of all BEVs sold in Europe were imported from China, highlighting a strong reliance on Chinese-made BEVs for future market growth.
Shifts in strategy among Chinese EV makers
Multiple Chinese automakers have indicated plans to establish European facilities to circumvent the tariffs, notably BYD amongst others, elsewhere Volvo is shifting production of its EX30 from China to Europe and BMW is doing the same for its IX3. However, others may adjust export strategies. PHEVs, which are excluded from the EU’s current tariff structure, may become more of a priority for Chinese OEMs looking to maintain their European foothold. Most recently Changan announced its plans to enter the European market, starting with a PHEV, while leaving open the possibility of BEVs in the future.
Other players are possibly considering alternative export strategies, such as SAIC and Geely possibly looking to export from Southeast Asia, to face lower tariffs.
Future outlook and EU’s position
Negotiations will continue, however the future of these remains unclear. While Europe’s BEV market penetration is still predicted to grow, competition in the global BEV market will intensify. Roberts concluded “The tariffs need to be a wakeup call, and force European manufacturers and governments to compete, at the vehicle level and all throughout the supply chain, making the transition to electric vehicles which is clearly desirable, achievable”.
More information
For information about how the tariffs may effect the market see our research or get in touch.