Tesla Rival BYD’s European Stride: EU Tariffs May Not Halt Market Dominance
The European Union faces an uphill battle in curbing the surge of Chinese electric vehicles (EVs) into the bloc, according to a study by Rhodium Group. The analysis suggests that tariffs of up to 55% might be necessary to effectively slow down imports.
EU’s Anti-Subsidy Probe: Chinese EVs Undeterred
The European Commission is currently investigating subsidies provided to Chinese EV manufacturers, concerned about the impact on domestic producers. However, Rhodium Group predicts tariffs within the range of 15% to 30% will be insufficient to check China’s competitive edge.
Image: Chinese EVs Set for European Export
[Image of vehicles being loaded at Taicang Port in China for shipment to Europe]
Rhodium’s report reveals that even at the higher end of the tariff range, Chinese producers, like BYD, can still maintain significant profit margins due to their cost advantages. This advantage allows them to sell cars in the EU at higher prices and profit margins compared to their home market, despite paying a 10% tariff.
BYD’s Aggressive Pricing
As an example, BYD’s Seal U model, priced at 20,500 euros in China and 42,000 euros in the EU, generates an estimated profit of 1,300 euros in China and 14,300 euros per car in Europe. Even with tariffs of 30%, BYD would still enjoy a higher profit margin in the EU.
The Need for Steeper Tariffs
The report highlights that tariffs of 45% or even 55% might be necessary to discourage producers like BYD from exporting to the European market.
EU’s Investigation and Impact on Chinese Automakers
Surge in Chinese EVs
Chinese EV imports are expected to account for 11% of the EU market in 2024 and could reach 20% by 2027. This surge has prompted the European Federation for Transport and Environment to warn of “a flood of cheap vehicles.”
Resistance in Other Markets
Chinese EV makers have faced resistance in the US due to high tariffs and political opposition. This makes the European market increasingly significant for companies like BYD seeking global expansion.
EV Manufacturers Adapt to Challenges
To mitigate policy risks, EV makers like BYD are shifting production to Europe. BYD plans to build a factory in Hungary. However, Rhodium believes Brussels could also employ other measures, such as restricting imports on national security grounds or increasing consumer subsidies for EU-made vehicles.
China’s Defense
China has criticized the EU’s subsidy investigation as “blatant protectionism” and maintains that its companies are simply more competitive. It remains to be seen how the investigation will impact the dynamic and rapidly growing European EV market.
Data sourced from: cnbc.com
