Weeks after the United States imposed 100% tariffs on electric vehicle (EV) imports from China, the European Union released the results of a seven-month investigation into government subsidies in the sector. Things could have gotten even worse for Chinese EV makers waiting to see what happens next.
The EU’s new tariffs could be up to 38.1%, but some automakers that were amenable to the investigation received lighter penalties. BYD Electric, a major rival to Tesla as the world’s top EV maker, was hit with a 17.4% tax, while Geely Automobile Holdings, the largest exporter, was hit with a 20% tax. SAIC, which did not participate in the investigation, received the highest tax, according to the EU. The new tariffs will take effect on July 4 and are on top of existing 10% import tariffs.
The result was an end to an investigation that had clouded the market for months, and a collective sigh of relief. Shares in Hong Kong-listed Chinese electric vehicle makers including BYD, Geely Automobile and Geely Automobile soared as the market concluded that the tariffs were relatively mild and would not stifle competition in Europe.
China has denied Western accusations of “overcapacity,” dumping and excessive subsidies to electric vehicle makers. Beijing has yet to announce any retaliatory measures.
Ironically, because the tariffs target all Chinese exporters, European manufacturers with operations in China are also caught in the net. SAIC has joint ventures with Volkswagen, Audi and the U.S. company General Motors. As a result, BYD and Geely are more price-competitive with their peers.
Chinese EV makers have made huge advances in quality in terms of design, performance and intelligence, and their efficient production has allowed them to produce more vehicles at lower prices, putting China ahead of European and American automakers as they fall behind.
Ultimately, the cost of the tariffs will be passed on to European consumers, who will have to choose from a limited selection of more expensive, lower-quality domestic cars until their own auto industries can catch up. With BYD planning factories in Hungary, Chery in Spain and Dongfeng Motor planning factories in Italy, European automakers are struggling.
