China-EU Tariff Clash Shakes EV Industry

Welcome to the latest edition of the China EV Pulse Newsletter!

In this issue, we dive into the intensifying tariff tensions between the EU and China, as newly approved EU tariffs on Chinese EVs take effect, sparking industry-wide concerns. In response, China has paused its automaker expansions in Europe, while SAIC considers legal action against the EU’s subsidy tariffs.

September saw a surge in Chinese EV exports to Europe, as manufacturers pushed shipments ahead of the new tariffs. Meanwhile, BYD continues to set records, achieving over 500,000 NEV sales—an impressive milestone for China’s EV leader.

As Chinese automakers gain ground, we also explore a critical question: Can German brands keep up with the pace of China’s EV innovation?

Stay with us for insights into these key developments shaping the global EV landscape.

Happy reading!

EU Tariffs on Chinese EVs Begin Amid Industry Tensions

The EU has implemented new tariffs on Chinese electric vehicles as of October 31, 2024, aiming to counter alleged market distortion from China’s heavy subsidies on EVs. The tariffs, ranging from 7.8% for Tesla to 35.3% for SAIC, are intended to protect Europe’s auto industry. Germany opposed the measure, concerned that it could increase consumer prices and affect German automakers like Volkswagen, BMW, and Mercedes, who rely on China for production. The German auto industry fears these tariffs may hinder the EV transition and strain EU-China trade relations.

While Germany remains cautious, other EU countries, particularly France, support the tariffs. French President Emmanuel Macron advocates for economic protection against unfair competition, as France is less reliant on China for automotive exports. The tension has sparked concerns about potential Chinese retaliatory tariffs on German exports, including cars, dairy, and pork. The conflict underscores a divide in Europe, with some stakeholders prioritizing short-term gains while others focus on securing the industry’s long-term sustainability.

China Pauses Automaker Expansions in Europe Over Tariffs

China has reportedly urged its automakers to pause expansion plans in Europe amid the ongoing trade dispute over EV tariffs with the EU. According to Bloomberg, Chinese officials advised manufacturers to halt their search for European production sites and signing of new contracts until the EU tariff negotiations are resolved. This “directive” has already impacted state-owned companies like Dongfeng, which canceled potential production plans in Italy. Private companies like BYD and Xpeng, however, may continue exploring European facilities.

Negotiations between the EU and China remain challenging, with discussions around price commitments to replace tariffs. While the EU seeks to counter China’s EV subsidies, China proposes controlling export prices and quantities. Chinese authorities have also warned automakers against negotiating individual tariff deals with the EU, aiming instead for a unified agreement.

SAIC Plans Lawsuit Against EU Over Subsidy Tariffs

SAIC Motor plans to file a lawsuit with the European Court of Justice, challenging the EU's 35.3% tariff on its electric vehicles, the highest rate imposed. SAIC argues that the EU's anti-subsidy investigation, which claimed Chinese EVs are unfairly cheaper due to government subsidies, was flawed and inflated subsidy levels by overlooking crucial information. Despite these tariffs, SAIC aims to remain in the European market, adjusting its strategy by focusing on hybrid models exempt from the new tariffs. The EU tariffs, intended to counter competitive advantages from subsidies, vary by manufacturer based on perceived subsidy levels.

EU Tariffs on Chinese EVs Drive Export Surge in September

New EU tariffs on Chinese EVs, expected to reach up to 35% in addition to the existing 10% import duty, are set to take effect in November. In anticipation, Chinese automakers ramped up exports, with over 60,000 EVs shipped to Europe in September, marking a 61% year-over-year increase. The tariffs aim to address a 20% price advantage for Chinese EVs, attributed to subsidies and lower production costs. Germany opposed the tariffs, warning of potential impacts on local manufacturers with operations in China, like Volkswagen, BMW, and Mercedes, and possible Chinese retaliatory measures.

BYD Achieves Record NEV Sales, Exceeds 500,000 Units

In October, BYD sold a record 502,657 new energy vehicles (NEVs), marking a 66.53% increase year-on-year and exceeding 500,000 units for the first time. This includes 189,614 battery electric vehicles (BEVs), up 14.57% year-on-year, and 310,912 plug-in hybrids (PHEVs), achieving eight consecutive months of record PHEV sales. Since March 2022, BYD has focused exclusively on BEVs and PHEVs, halting production of internal combustion engine vehicles.

Passenger NEV sales reached 500,526 units in October, up 66.24% year-on-year and 19.86% from September. BYD also reported 31,192 overseas sales, a slight annual increase but a 5.51% drop from September. For the first time, BYD disclosed export figures, with 28,012 units shipped from China.

Can German Brands Keep Up with Chinas EV Innovation?

Chinas automotive industry, once trailing in quality, has rapidly evolved into a global competitor, especially in electric vehicles (EVs), where it now pressures European manufacturers both in China and in Europe. Chinese automakers like BYD, Geely, and SAIC have capitalized on lower production costs and strong government support, enabling them to offer high-quality, affordable EVs that are increasingly attractive to European consumers. Projections suggest that by 2024, Chinese auto imports to Europe may exceed European exports to China, signaling a major shift in the global market.

The German auto industry, with brands like Volkswagen, BMW, and Mercedes, is feeling the strain as high prices and slow innovation make it difficult to compete with Chinese models both domestically and abroad. EU tariffs, set to add up to 35% on Chinese EV imports, aim to level the playing field, yet Chinese brands are already adapting, with companies like BYD planning European production facilities to avoid trade restrictions. These tariffs also risk a backlash from China, where German brands face declining sales as local brands capture market share.

European automakers are responding with increased investments in EV innovation, aiming to bring more affordable models to market. However, China's rapid advancement, particularly in battery technology, gives it a strong competitive edge. German brands are working to close this gap, but challenges with affordability and delayed model releases persist, leaving the question open as to whether they can maintain their status in a rapidly changing global market.

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Sebastian & team | China EV Pulse

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