Chinese-made electric vehicles faced a setback in July due to European Union tariffs aimed at protecting European automakers from low-cost competition. The number of new EVs registered in the EU from Chinese automakers like BYD and SAIC Motor Corp.’s MG fell by 45% compared to June. However, this drop may have been exaggerated as carmakers rushed to clear their stock before the added levies took effect on July 5. Matthias Schmidt, an independent auto analyst, suggests that the rush to empty stockpiles in June may have caused an inventory burn.
The provisional tariffs, which raised import duties to as high as 48%, were implemented to shield the EU industry from Chinese rivals that enjoy structural advantages in key areas like battery technology due to state subsidies. There are ongoing political tensions amidst talks to resolve the matter, with Beijing threatening to retaliate.
It is worth noting that Chinese brands were not significantly out of step with the overall decrease of 36% in EV sales across the 16 countries tracked by Dataforce. Western companies like BMW, Stellantis, and Tesla also import Chinese-made EVs that are subject to the higher tariffs. Schmidt points out that the inventory management of Western companies was more cautious, resulting in a less pronounced spike in June.
Despite the tariffs, Chinese brands, including MG and BYD, have not tempered their ambitions to expand in Europe. Their share of the EU’s electric-car market increased from 7.4% in July 2020 to 8.5% in July 2021, based on Dataforce figures. While EVs currently represent a small portion of the European market, they are expected to dominate over time as combustion cars are phased out. BYD has experienced significant growth, selling three times more EVs in July 2021 than the previous year. Although MG, part of Chinese state-owned SAIC, saw a 20% drop in sales compared to July 2020, BYD’s growth has helped soften the fall for Chinese brands.
BYD continues its expansion in Europe, evident through its sponsorship of the Euro 2024 football tournament in Germany, which exposed the company to 5 billion TV viewers. Despite the tariffs, BYD’s pricing strategy in Europe remains unchanged. In fact, the company expanded into Poland in August, indicating its willingness to adapt to higher duties as it builds a new plant in Hungary.
The new tariffs were imposed following an EU investigation that found Beijing’s subsidies to its EV industry cause economic harm to European carmakers. MG faces an additional 37.6% duty on top of the existing 10% rate, while Geely Automobile Holdings Ltd. and BYD will pay 19.9% and 17.4% more, respectively. These levies are set to become permanent in November unless a deal is reached between Brussels and Beijing.
The tariff debate coincides with a global slowdown in EV sales growth, impacting manufacturers worldwide. EU policymakers are striving to balance job protection with the goal of phasing out new fossil fuel-burning cars by 2035. Although the Dataforce figures for July include only the largest EU markets, such as Germany, France, and Italy, results for all 27 countries will be available soon. Germany and France witnessed a decline in Chinese brand vehicle registrations in July, whereas the UK, although not an EU member, saw Chinese brands gaining ground.
European manufacturers like Volkswagen and Stellantis have been establishing EV partnerships with Chinese counterparts to lower costs and remain competitive. On the other hand, Chinese automakers are expediting their plans to assemble EVs in Europe. Despite the tariffs, BYD is in a position to absorb the costs and continue its expansion into Europe. However, the company is facing constraints due to a lack of shipping capacity, which slows down its push into the European market. Schmidt emphasizes that perseverance is key for BYD and other Chinese automakers if they want to succeed in Europe.
