Europe might impose up to 55% tariffs on Chinese EV imports, says report

A new analysis by Rhodium Group reveals that the European Union is likely to impose tariffs of as much as 55% on Chinese electric vehicles to prevent their coming into the bloc. The report, published on Monday, comes amidst an investigation by the EU into subsidies for EVs imported from China.

The Rhodium Group expects the EU to impose duties between 15-30% on Chinese EVs, and it believes that this is not enough to check Chinese competition.

Chinese EV manufacturers’ profit in Europe

Even Chinese companies such as BYD, which ousted Tesla as the world’s largest EV producer last year, enjoy greater sales and profit margins in the EU than in their home territories, with a 10% tariff rate. At the same time, in their own country, Chinese EV manufacturers are waging a tough pricing race.

As per Rhodium, BYD’s Seal U model, which costs 20,500 euros in China and 42,000 euros in the EU, earns BYD almost 1,300 euros per vehicle at home, and over 14,300 euros per vehicle abroad.

Tax implications for Chinese EV manufacturers

Even when a 30% tariff is taken into account, BYD will make substantially more money in the EU than it did in China. After the price adjustments to maintain the market share, BYD may compromise on the pricing; however, with a 30% tariff, the EU market offers BYD high space for price adjustment.

The report also mentions that a much steeper tax dutiy of about 45%- 55% can also be levied upon the company.
In 2023, the EC started investigating Chinese EVs, and officials stated such cheap products threaten their domestic vehicles.

Experts state that incentives put in place in China in the beginning of the 2010s has significantly promoted numerous startups and greatly supported battery cells production, which allowed new, globally competitive and cost-efficient EVs.
Importance of European markets for Chinese EV manufacturers.

Considering the excessive tariffs and political issues in the U.S., Chinese EV producers are facing resistance in their markets, so, the European market is more important to companies choosing to be expand globally, such as BYD.

Chinese EVs are expected to make up to 11% of European markets in this year, and could reach up to 20% in the next three years. Made-in-China vehicles from non-Chinese companies can cross over 25% in 2024.

The European Union may also similarly investigate the non- Chinese companies’ imports of EVs. Rhodium argues that if the taxes are imposed in the range of 15-30%, then the business of foreign players, which export vehicles to China, such as BMW or Tesla, may cease to exist.

Due to these policy uncertainties, EV manufacturers have been planning to move their productions to Europe. Therefore, BYD is considering opening a factory in Hungary.

The Chinese government, nonetheless argues that these subsidy investigations by the EU are “blatant protectionism,” stating that they are just more competitive compared with Western companies.