EU Tariffs Push Chinese EV Makers to Pivot Strategies

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

The EU’s tariffs on Chinese-made electric vehicles are already reshaping the market, creating challenges and opportunities for automakers and consumers alike. From Dirk Adelmann, CEO of smart Europe, highlighting how tariffs impact pricing and market dynamics, to Tesla’s shifting strategies in China, we explore how key players are adapting to this evolving landscape.

In Germany, Chinese EV brands faced mixed fortunes in 2024, with some thriving despite higher tariffs and others struggling to maintain momentum. Meanwhile, projections for 2025 suggest a 30% surge in Chinese EV sales globally, driven by domestic demand and competitive exports.

Discover how these developments are influencing market strategies, climate goals, and the future of sustainable mobility in Europe and beyond.

Happy reading!

The Impact of Tariffs on Chinese EVs in Europe: Insights from smart Europe CEO Dirk Adelmann

The European Unions introduction of an punitive tariff on Chinese-made electric vehicles, effective since November 1, 2024, has already started reshaping the market. As Dirk Adelmann, CEO of smart Europe, points out, the effects are immediate and significant. “We are impacted by these tariffs from day one. All vehicles imported since November are subject to this additional duty, and it hurts,” Adelmann shared in a recent interview. This development has forced smart to adjust its pricing strategy, with an increase planned for January 2025.

Adelmann foresees broader implications for the EV market, particularly in the compact and mid-size segments. "Next year, it will become significantly more expensive to source an electric car in the B or C segment," he predicts. Some manufacturers may pivot back to plug-in hybrids or combustion engine vehicles—many of which are also imported from outside Europe, including China, Korea, or Japan. According to Adelmann, this undermines the EU's intent: “The punitive tariffs act more like a blunt instrument, as many manufacturers can easily circumvent them with alternative products. Ultimately, this could slow down the adoption of electromobility in Europe, making climate targets even harder to achieve.”

Despite the challenges, smart remains optimistic. Adelmann highlighted ongoing negotiations between the Chinese Ministry of Commerce (MOFCOM) and the EU Commission, which could result in more balanced solutions, such as minimum import prices or quota regulations. “These alternatives would be far better for customers than punitive tariffs,” he emphasized, underlining smart's commitment to navigating these changes while staying focused on the future of sustainable mobility.

Teslas China Sales and Production in 2024: A Mixed Picture

Teslas performance in China during 2024 highlighted both growth in local deliveries and a notable decline in exports. The Model Y remained a central driver of the brand's success, contributing significantly to Teslas global and domestic performance despite shifting trends in export priorities.

• Key Figures:

  • Model Y Retail Sales in China:

    • December: 61,881 units, up 3.04% year-on-year.

    • Full year 2024: 480,309 units, up 5.24% from 2023.

  • Tesla China Retail Sales (All Models):

    • Full year 2024: 657,102 units, an increase of 8.85% year-on-year.

    • Model Y accounted for 26.84% of Teslas global deliveries and 73.08% of Tesla Chinas retail sales.

• Exports:

  • Tesla China sold a total of 916,660 vehicles, including exports, in 2024, down 3.28% year-on-year.

  • Model Y exports dropped sharply, with only 76,380 units exported in 2024, marking a 54.58% decrease from the previous year.

  • Conversely, Model 3 exports rose by 4.14% to 183,178 units, contributing 70.57% of Tesla China’s exports.

The strategic decision to prioritize the domestic market in December led to Model Y exports plummeting to just 103 units. This shift underscores Teslas adaptability in aligning production with evolving market dynamics. The facelifted Model Y, launched in January 2024, is expected to reinforce Tesla's dominance in the worlds largest EV market, supported by the Shanghai Gigafactory's robust annual production capacity of 1 million units.

With these developments, Tesla is poised to balance its domestic and international market strategies while addressing challenges in export performance.

Registrations of Chinese Electric Cars in Germany in 2024

The year 2024 saw a mixed performance for Chinese electric vehicle (EV) brands in Germany, shaped by policy changes and economic pressures. A total of 43,903 Chinese EVs were registered in Germany, contributing to the country's overall 380,000 EV registrations, which marked a 27.4 percent decline from the previous year. This contraction is linked to the abrupt end of government EV subsidies in late 2023 and the introduction of EU tariffs on Chinese EV imports.

Key Figures and Trends:

• BYD: Registered 2,891 EVs, a sharp 30 percent decline year-on-year, impacted by a 17 percent EU tariff.

• MG (SAIC): The market leader among Chinese brands with 20,977 registrations, up 21 percent from 2023, despite a hefty 35.3 percent tariff.

• Smart (Geely): Achieved a significant 60 percent increase, registering 12,463 units.

• Nio: Registered only 398 vehicles, down nearly 70 percent, struggling even before the tariffs.

• Xpeng: A newcomer, registered 362 vehicles, with steadily increasing monthly sales since June.

The introduction of EU import tariffs in October 2024, ranging from 17 to 37.6 percent depending on the manufacturer, has put pressure on Chinese brands. However, some, like MG and Xpeng, managed to maintain growth by capitalizing on competitive pricing and new market entries.

Outlook for 2025

With stricter CO2 regulations and growing consumer interest in affordable alternatives, Chinese manufacturers are expected to see moderate growth in Germany. Hybrid models, which are exempt from tariffs, may become a strategic focus for some brands. Additionally, potential adjustments to the EU tariff framework could further influence the trajectory of Chinese EVs in the European market.

Chinese EV Sales Expected to Surge by 30% in 2025

Chinese electric vehicles are increasingly shaping the global mobility landscape, and 2025 is expected to bring significant growth. According to projections by the think tank China EV100, sales of new energy vehicles, including hybrids and fully electric cars, could rise by nearly 30 percent, reaching 16.5 million units. This surge would solidify China’s dominant position in the global EV market, with a market penetration rate exceeding 50 percent.

Domestic Demand Driving Growth

China’s domestic market will remain the backbone of this expansion, with 15 million NEVs expected to be sold within the country, reflecting a penetration rate above 55 percent. Key factors fueling this growth include government subsidies, such as trade-in incentives for older vehicles, which were doubled mid-2024 to an equivalent of 2660 Euro. By December, these programs had already facilitated the purchase of over 5.2 million vehicles, highlighting their effectiveness in spurring demand.

Global Implications

Exports will also play a crucial role in China’s EV strategy, complementing robust domestic sales. In 2025, Chinese NEVs are set to further penetrate international markets, leveraging competitive pricing and technological innovation to capture a larger share of Europe, North America, and emerging markets. With this anticipated growth, Chinese automakers are poised to strengthen their leadership in the transition to sustainable mobility worldwide.

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Sebastian & team | China EV Pulse

📸 _{Image Credits (in order of appearance): Robert Way / Shutterstock - smart - ice_blue / Shutterstock - Kittyfly / Shutterstock - Shutterstock / 245773270}