By T. Jayani, JadeTimes News
The European Union is poised to impose tariffs on Chinese electric vehicles (EVs) this week amid accusations that China is selling these cars at artificially low prices. The BYD Seagull, a compact and affordable EV, exemplifies the potential impact. Although it costs 69,800 yuan ($9,600; £7,500) in China, European safety regulations would likely double its price if it were imported, yet it would still be relatively inexpensive by EV standards. European manufacturers are concerned about the Seagull and similar Chinese models disrupting their market and displacing local vehicles.
China's domestic auto industry has rapidly expanded over the past two decades, driven by the “Made in China 2025” strategy, which emphasizes the development of the battery and auto sectors. Companies like BYD, SAIC (owner of MG), and Geely (owner of Volvo) have thrived, with BYD now competing with Tesla for the top spot in global EV production. In 2023, China sold over eight million EVs, representing about 60% of the global total, according to the International Energy Agency.
European and US policymakers are worried about the influx of Chinese EVs, fearing that domestic companies cannot compete due to China's substantial subsidies that keep prices low. A UBS report from September confirmed this advantage, indicating that BYD can produce cars at approximately 25% lower costs than top traditional carmakers. The Alliance for American Manufacturing has described the potential influx of cheap Chinese EVs as an “extinction level event” for the US auto industry, leading to the Biden administration increasing tariffs on Chinese battery powered cars from 25% to 100%.
In contrast, the EU seems to be considering a more moderate response. European Commission President Ursula von der Leyen announced an investigation into Chinese imports last September, criticizing the artificially low prices due to state subsidies. The Commission is expected to raise duties on Chinese EVs from the standard 10% for third country imports to between 20% and 25%. Matthias Schmidt of Schmidt Automotive Research suggested that this approach aims to level the playing field rather than purely protect the market.
However, these tariffs could have mixed consequences for European companies. They would impact not only Chinese brands but also European manufacturers like BMW and Tesla, which produce some of their EVs in China for export to Europe. Moreover, European manufacturers exporting high value models to China could face retaliatory tariffs, which has led to cautious responses from industry executives. Volkswagen Group’s CEO Oliver Blume and BMW’s Oliver Zipse have warned against the dangers of a trade war, with Zipse suggesting that tariffs could backfire.
Support for the EU investigation is strong in France, yet even there, opinions on tariffs vary. Carlos Tavares, head of Stellantis, warned against the potential pitfalls of tariffs, describing the competition with Chinese rivals as a "Darwinian" struggle. Renault’s CEO Luca de Meo emphasized the need for fair competition and called for a robust European industrial policy to bolster the sector, taking cues from US and Chinese strategies.
In the UK, the Trade Remedies Authority has indicated readiness to investigate Chinese EVs if requested by ministers or the industry, but no such request has been made. This issue will likely be addressed by the next government post election. While higher tariffs might buy time for European manufacturers and policymakers to adapt, many industry experts agree that Europe must do more than just impose tariffs to remain competitive in the global automotive market.