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The European Union would need to impose massive tariffs of around 50% to stem the flow of cheap Chinese electric cars into the bloc, according to a new analysis.
Brussels' massive anti-subsidy investigation into Chinese electric cars is expected to conclude within weeks, but researchers at Rhodium Group say any punitive action is likely to be too timid to deter Chinese carmakers.
“We expect the European Commission to impose duties of between 15 and 30 percent. But even if the duties are at the upper end of this range, some Chinese-based producers will still be able to achieve comfortable profit margins on the cars they export to Europe due to the significant cost advantages they provide,” he added. Enjoy it.
“Tariffs in the range of 40-50 percent – which are arguably higher for vertically integrated manufacturers like BYD – are probably necessary to make the European market unattractive to Chinese EV exporters.”
For example, BYD's Seal U sells for €20,500 in China and €42,000 in the EU. Rhodium says the estimated profit is €1,300 and €14,300 respectively, giving a strong incentive to export.
Imports already pay an EU tariff rate of 10%, which works out to around €2,100 per car.
“According to our calculations, a 30 percent tariff would still enjoy a premium of 15 percent (4,700 euros) from the EU in relation to its profits in China, which means that exports to Europe would remain very attractive,” the Rhodium report said.
The report says BYD may lower its prices to achieve its goal of capturing 5 percent of the EU market by 2025 and 10 percent by 2030. “Many other Chinese EV models will still enjoy a strong profit premium in the EU.”
Rhodium calculated that the average punitive duty across all sectors where the EU found subsidies would be 19 percent, if affected companies cooperated, as Chinese carmakers BYD, SAIC and Geely have done.
Brussels announced its investigations in October after a surge in imports threatened local producers who were switching from combustion-engined cars to electric cars.
Electric vehicle imports from China, including non-Chinese manufacturers with factories there, rose from $1.6 billion in 2020 to $11.5 billion in 2023. The market share of Chinese brands has more than quadrupled in that time to 8 percent last year.
That is set to reach 11 percent this year, then rise to 20 percent by 2027, according to estimates from the Transport and Environment Organization, a non-governmental organization.
German and American automakers, which manufacture in China and sell in the European Union, are also vulnerable to higher tariffs. Rhodium says the 15 percent tariff would wipe out Tesla's export profits from China to the European Union.
Beijing denounced the investigation as protectionist, saying its companies were simply more competitive.
EU officials told the Financial Times that initial tariffs could come as early as May, although the deadline is July. The standing tariffs must be supported by a majority of EU member states, and will be imposed in November.
Rhodium said the huge investment in factories means Chinese automakers are obligated to export to achieve a satisfactory return.
By 2026, BYD's annual production capacity in China will reach 6.6 million electric vehicles compared to 2.9 million at the end of 2023. To accommodate this capacity domestically, BYD will need to double its sales in a slowing market.
With countries including the United States already imposing tariffs and restrictions, the European Union has become the market of choice.
Rhodium expects that EU decision-makers in Brussels will be able to use other means to protect the local industry. They could restrict Chinese imports on security grounds, given the amount of data vehicles collect, or focus consumer subsidies for electric cars on models made in the European Union.
The European Commission said it would complete inspection visits by the end of April and was “evaluating the verified data and information.”
