Chinese electric cars on European soil: unfair competition and dumping?
While the European Union has approved a ban on internal combustion engines in new vehicles from 2035, a certain amount of apprehension is evident in Europe, cradle of famous brands and a leader in automotive innovation for over 100 years.
The European Commission survey
At present, China China accounts for around 8% of electric car sales in Europe. The rise of the Chinese carmaker BYD has, for the first time, surpassed Tesla in terms of electric car deliveries in the 4ᵉ quarter of 2023..
In response to fears of a massive influx of Chinese electric cars onto the European market, in October 2023 an investigation into the subsidies granted to these vehicles in question.
Today, world markets are flooded with cheap Chinese electric cars, whose prices are kept artificially low by massive public subsidies.
This investigation, limited to 13 months, will evaluate the extent of Chinese subsidies in this sector. In the event of proven unfair competition, Europe may impose additional additional customs duties on the products concerned, in accordance with WTO (World Trade Organization) rules.
As a reminder, as of January 1ᵉʳ, 2024, France will only be issuing a ecological bonus only to electric vehicles with an environmental score deemed acceptable. Only vehicles whose CO2 emissions during production and transport to the end customer remain below a certain threshold are eligible for this aid.
In addition to this environmental score :
- sound weight must be under 2.4 tonnes,
- its cost must not exceed €47,000 inc. excluding options,
- and must be powered by electricity and/or hydrogen with no CO2 exhaust emissions.
In short, this measure excludes all Chinese vehicles.
The European Commission's final verdict
Important countervailing duty updates for Chinese BEVs
Following an anti-subsidy investigation, the European Commission has decided to impose provisional countervailing duties on imports of battery electric vehicles (BEVs) from China. This decision, announced on July 4, 2024, follows the identification of unfair subsidies within the BEV value chain in China, threatening European industry.
Here are the key points to remember:
- Provisional duties: Duties ranging from 17.4% to 37.6% apply to the main Chinese producers (BYD, Geely, SAIC), while a weighted average rate of 20.8% applies to the other cooperating producers.
- Entry into force and duration: These rights came into force on July 5, 2024 for a maximum duration of four months.
- Final decision: A final decision on definitive duties, which could last five years, will be taken by EU member states.
- Next steps: Member States will vote on the provisional measures within 14 days of their publication. The Commission will then communicate its proposal for definitive measures, on which Member States will also vote.
- Tesla: An individual duty rate could be applied to Tesla, which has been the subject of a reasoned request.
It is important to note that the impact of these countervailing duties on European automakers is not specifically addressed in the press release. However, the investigation has taken into account the potential impact of these measures on importers, users and consumers of BEVs in the EU.
"Our aim is not to close the EU market to Chinese electric vehicles, but to ensure fair competition."
💡Did you know ? The week before the EU's decision, shares in shares in Chinese electric car manufacturers fell in Hong Kong. Geely and XPeng saw their values fall by around 8 %while BYD fell by around 3 %.
On the US side, on May 14, President Joe Biden declared an increase tariffs on Chinese electric vehicles from 25% à 100%. This measure is aimed at strengthening the American market, thus favoring Tesla, the national leader.
The impact of this measure on European carmakers
Initially, these initiatives were put in place so that the European Union could defend its automotive sector, as this :
- create many well-paid jobs,
- promotes an environmental program aimed at reducing CO₂ emissions from transport.
Despite the EU's various plans to promote electric vehicles, some European countries have experienced difficultiesThese include the removal of purchase incentives in Germany and other markets. On top of this, we have the customs duties imposed by the European Commission to contend with.
German manufacturers such as Volkswagen and BMW would be affected by a trade dispute following the latest measures. The reason? Both sold 4.6 million vehicles in China in 2022a key market for their business.
As with the other two manufacturers, China accounts for 36% of total making it particularly vulnerable to retaliation.
However, they are not the only European automakers to express their concerns. Companies such asAudi, Mercedes and Volkswagen likewise sell around 40% of their sales in China.
The risks of a major trade conflict are obvious, and its consequences must be taken into account.
We also have Volvo, a Swedish manufacturer belonging to the Chinese Geely group, which achieves 42% of its sales in Europe and 24% in China.
It's a bad idea (...) to dismantle world trade.
In short, higher taxes could provoke retaliatory measures against them.
This is why the taxes have been overwhelmingly rejected by Western automakersincluding Ola Källenius, CEO of Mercedes-Benzpleading for open markets.
We don't close our markets to foreign companies, because we don't want that for our companies either.
The counter-attack by Chinese manufacturers against these measures
Just to counter the decision to introduce an environmental score for eco-friendly vehicles, subsidiary MG of SAIC Motor in China has opted for an immediate 4,000 discount on all its electric and plug-in hybrid models..
What's more, Chinese giant BYD has announced plans to build a factory in Hungary to avoid economic sanctions against Chinese models.
On the other hand, following the investigation carried out by the European Commission, China launched an investigation in January targeting all brandies spirits imported from the European Union, specifically including cognac. But that's not all: according to Chinese state media, these products will also be targeted:
- wine,
- pork,
- dairy products,
- and large-displacement vehicles.
As a reminder, European automakers, particularly the Germans, are voicing their concerns. Companies such asAudiBMW, Mercedes and Volkswagen around 40% of their sales in China. Higher taxes could provoke retaliatory measures against them.
Electric vehicles concerned
Among the vehicles affected by these punitive measures are the Dacia Springan affordable choice for many European consumers, but also the Volvo EX30recently voted 2024 premium car, are also affected.
What's more, the new Smart #1 and Smart #3as well as the Tesla Model 3 will also see their sales prices potentially increase.
These models account for a significant share of the electric vehicle market in Europe, making the price increase all the more significant.
What's more, the European Union's decision to withdraw the ecological bonus for cars made in China further complicates the situation for consumers.
This combination of factors is likely to make the purchase of electric vehicles less attractive, which could slow down their adoption in the region.
Conclusion
The European Union's decision to impose additional taxes on Chinese electric vehicles is likely to have a significant impact on the European market, affecting both automakers and consumers.
From now on, 2 major questions arise:
- What are the long-term consequences for the production chain and final selling prices?
- What strategies can European carmakers adopt to stay competitive?
We'll be keeping an eye on developments in this area over the coming weeks. Stay tuned to our blog Beev so you don't miss out on any electrifying news!
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