What just happened? Those ultra-affordable Chinese EVs crowding lots across the European Union may soon be much harder to find at bargain prices. The EU has just greenlit hefty new tariffs aimed at slowing down cheap imports from China.
In a move sure to rile up Beijing, the European Commission has announced that it will impose provisional anti-subsidy duties ranging from 17 percent to 38 percent on Chinese electric cars starting next month. The new tariffs will be added on top of the existing 10 percent duty. This means that by next month, popular affordable Chinese models could see their prices in Europe increase by almost 50 percent.
Giants like BYD, the world’s top-selling EV brand, and Geely will face additional tariffs of 17 percent to 20 percent on individual car models. Meanwhile, European automakers exporting EVs made in China, such as Mercedes and Renault, will pay a flat 21 percent rate.
Chinese companies like state-owned SAIC, which did not cooperate with the EU’s probe into subsidies in the EV sector, will face the maximum 38 percent tariff rate. SAIC’s affordable MG brand has dominated the lower end of the European EV market.
While significant, the tariffs are still dwarfed by those announced by the US. In May, President Biden said duties on Chinese EVs would increase to 100 percent.
The crackdown on affordable EVs is driven by claims that Chinese automakers have benefited from unfair subsidies from their government, allowing them to sell vehicles at artificially low prices in Europe. France has been the biggest supporter of these punitive tariffs.
European Commission Vice President Valdis Dombrovskis says he is still open to negotiating with Beijing over the next three weeks before the provisional duties are locked in on July 4. However, China has already fired back, condemning the “ill-informed and lawless” move as a “naked protectionist act.”
Beijing warned it will “take all necessary measures” to defend Chinese companies’ rights and interests. The tariffs could generate billions annually for EU coffers as Chinese EV sales in the region continue to surge.
Automakers may have some flexibility to maintain profits despite the tariffs. A Bloomberg report indicates that many Chinese EVs fetch roughly double the price in Europe compared to their home market, giving automakers a cushion to partially absorb EU duties.
Additionally, automakers could shift more production directly to Europe to bypass the tariffs, or pivot their sales efforts to other emerging EV markets like the Middle East and Latin America.
Following news that the tariffs are manageable, BYD shares jumped as much as 8.8 percent in Hong Kong trading on Thursday.
European Union aims to crack down on cheap Chinese EVs with steep tariffs