Europe may have to impose tariffs of up to 55% to curb Chinese EV imports: report

Europe may have to impose tariffs of up to 55% to curb Chinese EV imports: report

The European Union will have to impose higher-than-expected tariffs of up to 55% on Chinese electric vehicles to curb their imports into the bloc, according to a new analysis by Rhodium Group.

The findings, released on Monday, come amid an ongoing EU anti-subsidy investigation into EV imports from China.

Rhodium Group, which expects the EU to impose tariffs in the range of 15% to 30% on Chinese EVs, said the tariffs are unlikely to be enough to check competition from China.

“Even with import duties at the higher end of this range, some China-based manufacturers can still generate comfortable profit margins on the cars they export to Europe because of the huge cost advantages they enjoy,” the report said.

Chinese companies like BYD, which dethroned Tesla to become the world’s largest EV manufacturer last year, can sell cars at higher rates and profit margins in regions like the EU compared to the domestic market, despite paying a 10% tariff rate. Chinese EV makers are locked in a fierce price war in their home market.

BYD’s Seal U model, which sells for 20,500 euros in China and 42,000 euros in the EU, generates an estimated profit of 1,300 euros in its home market compared to 14,300 euros per car in Europe, Rhodium said. Even after 30% in tariffs, companies like BYD will make higher profits in the EU, he added.

The report said that BYD may have to cut prices to meet its goal of gaining more market share in the EU. A 30% tariff rate would still provide enough room to do so.

“A steeper duty of around 45%, or even 55% for a fiercely competitive manufacturer like BYD, may be needed to make exports to the European market unattractive on commercial grounds,” the report said.

EU investigation
The European Commission, the EU’s executive arm, launched an investigation into EVs and Chinese subsidies last year, with officials saying that a flood of cheap vehicles threatens domestic manufacturers.

According to some experts, incentives implemented in China in the early 2010s led to a surge in battery cell startups and capacity increases in the country, paving the way for globally competitive and affordable EVs.

Chinese EV makers have already faced opposition from the U.S. amid high tariffs and political opposition, making the European market even more important to companies like BYD pursuing global expansion.

EVs from Chinese companies are expected to make up 11% of the EU market in 2024 and could reach 20% by 2027, according to an analysis by the European Federation for Transport and the Environment.

When taking into account Chinese-made vehicles from non-Chinese companies, the figure is expected to exceed 25% this year.

Imports of EVs from non-Chinese firms could also be included in the EU subsidy investigation, with Rhodium estimating that duties at the 15%-30% level could wipe out business for foreign players such as BMW or Tesla that ship cars from China.

In response to policy risks, EV makers have sought to shift manufacturing to Europe. BYD plans to build a factory in Hungary.

However, Rhodium added that Brussels could use other means to protect the European EV industry, such as restricting Chinese imports on national security grounds or increasing consumer subsidies for EU-made vehicles.

The Chinese government has slammed the EU subsidy investigation as “blatant protectionism,” arguing that its companies are more competitive than their Western counterparts.