EU tariffs will not stop Chinese electric vehicles from entering bloc: Report

New tariffs are unlikely to stop Chinese electric vehicle (EV) firms from entering the European Union (EU) as their advantages in production and price will make their products competitive abroad, according to industry officials at the world’s largest trade show, as detailed in a report by South China Morning Post.

Officials spoke at the China International Import Expo

Officials speaking at the 2024 China International Import Expo (CIIE) in Shanghai, stated that mainland companies are able to offer the best pure electric cars at the best prices and their development and manufacturing capabilities are unmatched by international competitors, the South China Morning Post report explained further.

“The Chinese carmakers’ superiority in EV making can be copied to other markets since they can cater to global consumers’ demand,” Sam Wu, CEO of Ford Motor China, said at the Hongqiao Forum, which is part of the CIIE, on November 6. “The Chinese EV industry is in the pole position thanks to an early start and government support.”

Two officials with major international carmakers said some of their Chinese-made EVs are easy to sell in EU countries even after absorbing additional tariffs of 17 per cent to 35.3 per cent.

EU recently imposed tariffs on pure-electric cars made in China

Last month, the EU voted to impose tariffs on pure-electric cars made on the mainland following an anti-subsidy investigation. The new duties are on top of the standard 10 per cent tariff applied to pure-electric cars made in China. The new tariffs will be in effect for five years.

Further, global brands, including Volkswagen and BMW, are also subject to punitive measures because their mainland-built cars are assembled with partners like China-owned SAIC Motor and Brilliance Auto.

Chinese EV makers have a major cost advantage over their global rivals, benefiting from a fully developed supply chain and strong manufacturing heft, according to Stephen Dyer, Greater China co-leader and head of the Asia automotive practice at global consultancy AlixPartners. Pure electric cars made in China cost 35 per cent less than those assembled in other markets, he said in July.

In a teardown report last year, UBS said BYD, the world’s bestselling EV producer, had a sustainable 25 per cent cost advantage over traditional EU brands. BYD faces a 17 per cent additional EU tariff if it exports its mainland-built cars to the bloc.

Yin Tongyue, chairman of state-owned Chery Automobile, told the forum on November 6 that Chinese carmakers would not prosper without integrating into the global supply chain, the South China Morning Post report explained further.

“Chinese EV makers could not make rapid progress from the very beginning if we were not able to access the best technologies and the global automotive supply chain,” he said. “I think synergy with global partners and sustainability are the keywords for the Chinese players as we try to maintain our advantages.”

Xpeng, a Chinese builder of premium EVs, said on Wednesday that it was discussing with its European dealers about how to overcome the tariffs.

“Europe is a market that we put a lot of value on,” said Brian Gu, Xpeng’s vice-chairman and co-president. “As a company, we need to actively consider what types of models to offer locally, what business strategies to adopt, and whether we can make larger investments in the region to address these challenges.”

In the EU, SAIC faces the highest rate of 35.3 per cent, while Geely Auto was hit with an additional tariff of 18.8 per cent. Other Chinese carmakers will have to absorb a 20.7 per cent rate.

With the recent election victory of Trump the ongoing trade war between leading economies looks all set to escalate further. Market participants and investors across the globe will stay focused on these developments going ahead.