Chinese electric vehicle (EV) manufacturers are likely to maintain their competitive edge in the European market, even in the face of recently imposed tariffs. Analysts assert that the current tariff rates are insufficient to deter Chinese exports significantly, allowing brands like BYD, Geely, and SAIC to continue expanding their footprint in Europe.
Understanding the Tariff Landscape
Recent revisions to EU tariffs on Chinese automobiles have seen rates for major manufacturers slightly reduced. As of late August:
- BYD: Tariff reduced to 17% from 17.4%
- Geely: Tariff reduced to 19.3% from 19.9%
- SAIC: Tariff reduced to 36.3% from 37.6%
These adjustments suggest a more favorable environment for Chinese EVs, particularly when compared to the more severe tariffs imposed by North America, which reached as high as 100% in May.
The Threshold for Impactful Tariffs
Research from the Rhodium Group indicates that tariffs would need to soar to at least 50% to significantly impede Chinese EV exports to Europe. For vertically integrated manufacturers like BYD, this threshold might need to be even higher. Joseph McCabe, president and CEO of AutoForecast Solutions, highlights that while current tariffs may present a hurdle, they do not constitute a barrier to entry for Chinese manufacturers.
Interconnected Markets: A Key Factor
One of the main reasons Chinese EVs are likely to thrive in Europe is the deep interconnection between European and Chinese original equipment manufacturers (OEMs). McCabe explains, “It is a delicate balance to promote domestic European production without severely impacting their Chinese operations.” This interconnectedness means that a significant shift in policy could have reciprocal impacts on both sides.
Competitive Pricing and Innovative Offerings
Chinese automakers are also capitalizing on competitive pricing to strengthen their market position. For instance, BYD recently introduced its Dolphin model to the European market at an attractive price of less than $21,550, significantly undercutting the Tesla Model 3, which is priced around $44,480 in the U.K. Even after factoring in the 17% tariff, the Dolphin remains approximately $23,270 cheaper than the Tesla equivalent.
In response to this competitive landscape, legacy automakers such as Volkswagen are planning to introduce low-cost EV models to compete more effectively. Volkswagen aims to develop an electric vehicle priced at around $21,476 by 2027, acknowledging the growing threat from their Chinese rivals.
The Future of the EV Market in Europe
Despite the geopolitical tensions and potential retaliatory measures from China, the investment community appears to favor new and innovative players in the EV market. McCabe notes, “Now, profitability takes a back seat to market share,” emphasizing a shift in priorities among investors.
William Ma, CIO of GROW Investment Group, argues that extreme tariff measures—potentially reaching 300%—would be illogical and could exacerbate tensions between Europe and China. If the Chinese OEM sector faces significant disruption, the risk of retaliatory tariffs from China looms large.
Conclusion
As the EU navigates its tariff strategy against Chinese EV manufacturers, it becomes evident that the current rates are unlikely to substantially hinder the expansion of these companies in the European market. With competitive pricing, innovative models, and a deeply interconnected manufacturing landscape, Chinese EV makers are well-positioned to continue their growth in Europe, despite geopolitical challenges and economic uncertainties.
I am Aparna Sahu
Investment Specialist and Financial Writer
With 2 years of experience in the financial sector, Aparna brings a wealth of knowledge and insight to Investor Welcome. As an accomplished author and investment specialist, Aparna has a passion for demystifying complex financial concepts and empowering investors with actionable strategies. She has been featured in relevant publications, if any, and is dedicated to providing clear, evidence-based analysis that helps clients make informed investment decisions. Aparna holds a relevant degree or certification and is committed to staying ahead of market trends to deliver the most up-to-date advice.