China-made electric cars imported into Europe will face additional duties of up to 38.1% starting in July, a decision that is likely to result in retaliation from Beijing. This move by the European Commission has raised concerns in Europe’s auto industry, particularly among German carmakers who heavily rely on sales in China. Trade data shows that almost a third of their sales are derived from the Chinese market. While other continental automakers have divested their China businesses, they could still be indirectly affected through their investments.
**MERCEDES-BENZ**:
Mercedes-Benz is one of the brands with the highest exposure to China. According to the automaker’s full-year results, China accounts for a third of its unit sales, with nearly one in five cars sold there being imported from Germany. Mercedes-Benz exports top-end models like the S-Class and Maybach to China, while its mid-range models are produced locally. The imposition of retaliatory tariffs on German-made cars could have a disproportionate impact on the company’s profit, unless they decide to raise prices.
**BMW**:
BMW also has a significant presence in the Chinese market, with nearly a third of its unit sales coming from China. However, according to its annual report, only 13% of those sales are attributed to imported cars, primarily high-end vehicles. The company has a joint venture with China’s Brilliance Automotive, producing cars for the German group to sell in China. BMW also produces electric versions of the Mini Cooper and Mini Aceman in China through a joint venture with Great Wall Motor Co, with Europe-bound vehicles being subject to the tariffs.
**VOLKSWAGEN**:
Volkswagen holds the largest share of the Chinese market among foreign companies, accounting for 14.5% of sales. The company has managed to lower its reliance on imports from Germany by localizing production, which now only accounts for 2.5% of its China sales (excluding Porsche). Volkswagen aims to increase its market share to 15% by 2030 while reducing costs by 40% to compete with Chinese competitors. In April, both BMW and Volkswagen pledged over $5 billion to expand research and production in China.
**PORSCHE**:
Porsche, owned by Volkswagen, is highly exposed to the Chinese market, with 21% of its sales coming from China in the first quarter, all of which are imported vehicles. However, the luxury carmaker is in a better position to pass on the tariffs to consumers due to its strong pricing power in the premium sector.
**VOLVO CAR**:
Volvo Car, majority-owned by China’s Geely, generates a quarter of its unit sales in China but only about 10% of its profit. The Swedish carmaker focuses on local production, with imported vehicles accounting for about 4% of its Chinese sales. However, in anticipation of the EU tariff decision, Volvo has started shifting some EV production to Belgium.
**STELLANTIS**:
Stellantis, the Franco-Italian group, has relatively low exposure to China. Its main connection to the Chinese market comes from its recent investment in Leapmotor. The company plans to export two EV models from China by the end of the year.
**FERRARI**:
Ferrari, like other luxury carmakers, imports all of its sales in China. However, it has the lowest regional exposure among luxury brands, with sales in China accounting for just 9% of its total sales. As a result, Ferrari may have more flexibility to pass on tariffs to customers due to its pricing power.
**RENAULT**:
Renault has the smallest exposure to China among the automakers mentioned. Its presence in the Chinese market is through joint ventures with Jiangling Motors and Brilliance Auto, as well as with Nissan, which holds a roughly 3% market share. Renault’s Dacia Spring EV is manufactured in China through a partnership with Dongfeng. In May, Renault and China’s Geely announced a joint venture focused on developing combustion and hybrid engines to enhance the competitiveness of their legacy auto business.
In conclusion, the European Commission’s decision to impose additional duties on imported China-made electric cars will have significant implications for various automakers, especially those heavily reliant on the Chinese market. The tariffs could impact profit margins and necessitate higher prices for these companies unless they can absorb the costs or pass them on to consumers. While some automakers have already implemented strategies to localize production or shift production to other regions, the retaliatory actions from Beijing will be closely watched, as they could impact the global automotive industry.
