Li_DanLi_Dan ・ Jun. 6, 2024
EU Tariffs Will Not Have Major Impact on Chinese EV Makers, European Expert Says
Chinese automakers have high margins built in to their vehicle pricing in European markets and even an increase in tariffs to 25% from the current 10% would still leave a "narrow" margin, the expert said.

TMTPost -- A European auto expert believes the upcoming tariffs on electric vehicle (EV) exports imposed by the European Union will not have major impact on Chinese EV makers.

Credit:Xinhua News Agency

Credit:Xinhua News Agency

The export volume of Chinese EVs to Europe may not be significantly affected by the new EU tariffs because Chinese automakers have high margins built in to their vehicle pricing in European markets, said Matthias Schmidt, the founder of Schmidt Automotive Research, a Germany institution that engages in European auto market data intelligence and analysis. “We assume they will be able to soak of the rise in tariffs largely into their high profit margins and the customer won’t notice any difference,” Schmidt told Automotive News Europe.

Some analysts have expected that the tariffs could sharply cut sales in Europe, but Schmidt said the main impact would be on the Chinese brands’ bottom line. Chinese automakers have a 30% price advantage on EVs made in China, Schmidt quoted estimates of the investment bank UBS. Even an increase in tariffs to 25% from the current 10% would still leave a “narrow” margin, he said. 

Prior to Schmidt’s remark, the New York-based think tank Rhodium Group expected tariffs close to 30% and noted that any new tariffs would have to be as high as 50 % (from the current 10 percent) to have a real impact. At that rate, Rhodium said in a report at the end of April said, “some China-based producers will still be able to generate comfortable profit margins on the cars they export to Europe because of the substantial cost advantages they enjoy.”

The expectations came as the EU is set to announce its decision on provisional tariffs next week. The EU officially launched an investigation into EVs from China on October 4 2023.The European Commission is set to decide whether to impose tariffs more than the current 10% standard rate for cars within 13 months once the investigation started. The possible tariff will affect not just Chinese automakers but also foreign brands that produce vehicles there such as Tesla, Renault and BMW. The probe may result in tariffs close to the 27.5% level already imposed by the U.S. on Chinese EVs, Bloomberg reported last September.

The European Commission President Ursula von der Leyenan suggested last month she would diverge from the U.S. on tariffs. “We share some of the concerns of our [US] counterparts but we have a different approach, a much more tailored approach,” von der Leyen said two weeks ago. Head of the EU’s main executive body stressed should a months-long EU investigation be confirmed Chinese subsidies exist, she can guarantee the level of the duties EU would impose is correspondent to the level of damage.

Italian Industry Minister Adolfo Urso said last month that the EU should follow the example of the U.S. government to impose tariffs on Chinese products. Urso warn the steep tariff hike imposed by the Biden administration could lead to China’s export shift toward Europe and dampen the bloc’s auto industry. "Much higher tariffs against Chinese products are inevitable if we do not want the European industry to be wiped out," said Urso.

Reuters learned last week that the European Commission will delay its decision on Chinese EV tariffs until after the European Parliament election on June 9. The new deadline of the provisional tariffs, which were expected to be announced by June 5, is said to be June 10, the day after results of the European Parliament election are released.

The EU officials told Chinese automakers the European Commission is expected to levy provisional duties on July 4, the South China Morning Post reported earlier this week, citing people familiar with a meeting between a Chinese auto association met with the EU’s department of trade in Brussels on Monday. It was said that no exact tariff rate were disclosed in the hearing, while the commission is expected to inform these companies privately next week about the level of import duty that will be applied.

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