The European Commission’s decision to impose a series of tariffs on Chinese electric cars – on the grounds that they receive state aid to make their prices cheaper and represent unfair competition – has put electric vehicle models assembled by the Asian giant at risk. Some models have seen sales soar across the European Union.
Data released by the European Automobile Manufacturers’ Association (ACEA) shows that its market share has increased sevenfold over the past four years.
In 2020, cars assembled in China – whether or not they come from brands based in this country – represented less than 3% of the electric market in Europe. By the end of 2023, however, its market share will reach 21.7%. Of this figure, 7.3% correspond to models from Chinese brands, including for example MG or BYD. The rest are cars from European or American manufacturers that are produced in this country, for example Tesla, which is also affected by customs duties. The following graph summarizes the evolution of this market share.
As for Spain, the import data for models manufactured in China extends to the first half of 2024, but corresponds to all types of cars, whether electric or thermal, without breaking them down. In the first six months of this year, Chinese vehicle imports fell by more than 23%. It is the third country where the most cars are purchased, behind Germany and Japan. Specifically, they represent a market share of 8.4% and represent imports worth 1.127 billion euros. In the German case, they represent almost 3.3 billion euros and in Japan, 1.2 billion euros.
Returning to the data for the EU as a whole, the balance is unbalanced. In 2023, the Union imported more than 438,000 electric cars manufactured in China, for a value of more than 9.7 billion euros. On the other hand, exports of plug-ins “made in Europe” to this Asian market did not reach 11,500 units and their value remained at 852 million euros, according to data published by ACEA.
The political debate on the question of customs tariffs
The idea of imposing a surcharge on Chinese electric cars sold in Europe has a long history. A year ago, European Commission President Ursula von der Leyen criticized state aid in her speech to the European Parliament. “Global markets are flooded with cheaper Chinese electric cars. Their price is kept artificially low by huge state subsidies. “This distorts our market,” she said. “And since we don’t accept this from within, we don’t accept it from outside.”
These tariffs were confirmed in July, but were revised downwards in August. The EU calendar indicates that these, after a new round of dialogue with the sector, must be approved at the end of October, but it is still unclear what will happen, because there are countries like Germany that are against it and Spain has demanded that this strategy be rethought.
The Prime Minister, Pedro Sánchez, assured during his official trip to China that this tariff battle should be reconsidered, because both economic blocs could lose. “All EU members and the Commission must reconsider our position. We do not need another trade war. We must seek an agreement between the European Commission and China within the framework of the WTO [la Organización Mundial del Comercio]”We are all reconsidering our position,” he said.
On Thursday, the spokesperson for the Community Executive, Olof Gil, recalled that “the Commission is responsible for the EU’s trade policy” but that it is open “to finding a negotiated solution”, adding: “Any such solution must be adequate and effective to address the risk of harm to European industry,” he added. The next step will take place next week, with the trip to Brussels of the Chinese Minister of Commerce, Wang Wentao, during which the trade policy for electric cars will probably be discussed.
What will happen to prices?
While we wait to see if the new tariffs will become a reality, it remains to be seen what will happen to the prices of electric vehicles made in China. Some companies are already saying they will not pass the cost on to the end consumer. Lynk & Co, part of Asian giant Geely, has no plans to put them online. “We can’t, many of our competitors are made in Europe,” its European CEO Nicolas Appelgren said in comments reported by Reuters. “We have to price the car correctly for the European market and work from there.” Lynk & Co, which is looking for manufacturing sites in Europe, would face a surcharge of more than 18% if the proposed tariffs are confirmed.
Other manufacturers, also European, have been very critical of the European Commission’s decision. One of them is the CEO of Cupra and Seat, Wayne Griffiths, who assured that the viability of the company was at risk if these tariffs were applied. Cupra manufactures the Tavascan in China, which would be subject to a 21% surcharge. “These tariffs were intended to prevent an avalanche of cheap cars from China, Chinese brands. Our car is not cheap, it is a European brand, it is a European design,” he justified. According to Griffiths, if the tariffs planned for the Tavascan are maintained, for each car sold, they “will lose money”. The Tavascan is currently sold for 52,000 euros.
Cupra, part of the Volkswagen Group, has issued a warning about the potential impact on its balance sheet if it cannot manufacture in China, which comes at a time when European factories are not exactly operating at full capacity. According to an analysis by Bloomberg, nearly a third of the plants of the five largest European car groups (Volkswagen, Renault, Stellantis, Mercedes-Benz and BMW) produced below capacity in 2023, although the Spanish plants were above other European facilities, according to the report.
