Overseas Expansion of Chinese Electric Vehicle-Makers Reaches Crossroads as EU Tariffs Stymie Plans(AI Translation)

【周刊提前读】欧盟关税大棒阻遏中国电动车 出海之路走到十字路口

On June 12, 2024, the European Commission (EC) preliminarily disclosed the outcomes of its ongoing anti-subsidy investigation into Chinese-made electric vehicles (EVs), initiated in October 2023. The investigation, expected to last no more than 13 months, revealed that Chinese EVs benefit from government subsidies, making them 20% cheaper than EU counterparts and causing harm to the European auto industry. If unresolved, provisional anti-subsidy duties will be enforced starting July 4, potentially becoming permanent for five years [para. 1][para. 2][para. 4][para. 5].

Key Chinese manufacturers sampled in the investigation include SAIC Motor, Geely Auto, and BYD, facing differentiated tariffs of 38.1%, 20%, and 17.4%, respectively. Multinational companies like Tesla, BMW, and Renault, producing in China and exporting to Europe, may also face tariffs. The overall tariff level for Chinese-made EVs will rise significantly, potentially stoking further tensions [para. 5][para. 6][para. 8][para. 9].

Experts suggest that while there is still time for negotiation before the imposition of tariffs, significant changes in tax rates are unlikely. Maintaining open communication channels remains crucial, as complexities and unpredictable critical points persist in China-EU relations [para. 11][para. 12][para. 13]. Nonetheless, China's Ministry of Commerce views the EU's actions as harmful and inconsistent with World Trade Organization rules, pledging necessary measures to protect Chinese industry interests [para. 14][para. 15].

Subsequently, European automakers and other stakeholders are actively lobbying to prevent an escalation of trade conflicts. Europe represents the most significant export market for Chinese EVs. In 2023, China exported 482,000 battery electric vehicles (BEVs) to the EU, comprising 45.1% of its total EV exports. If a 21% uniform tariff is imposed, short-term exports could drop by 30%, posing immediate setbacks [para. 17][para. 18][para. 19].

The anti-subsidy investigation has already impacted exports, with a noted decline in the first four months of 2024. A backlog of Chinese EVs at European ports indicates slowing sales and logistical issues exacerbated by tightened customs controls, suggesting periodic challenges for Chinese EVs in Europe [para. 20][para. 21]. Long-term solutions like localized production are cited as viable pathways to address trade conflicts effectively [para. 22][para. 23][para. 24].

Most European automakers, particularly Volkswagen and BMW, oppose the EU’s additional tariffs due to their reliance on the Chinese market. They argue that such measures would weaken Europe’s automotive sector competitiveness and trigger protectionism [para. 28][para. 29][para. 30]. However, as European EV sales grapple with reduced demand and halted subsidies, transitioning to electrification has proven challenging [para. 31][para. 32][para. 33].

Chinese EV brands, competing with established European brands, are affected by substantial cost disparities. Investments in local battery industries and EV production remain under development, complicating Europe’s capacity to match China’s supply chains [para. 36][para. 37][para. 40].

Amid growing trade tensions, European companies, notably Stellantis and Renault, are exploring partnerships with Chinese counterparts to advance EV development, potentially avoiding heightened tariffs. Conversely, smaller and less established Chinese EV manufacturers may scale back their European presence due to increased costs and logistical hurdles [para. 58][para. 59][para. 60].

Following setbacks in Europe, Chinese automakers may pivot towards other emerging markets like ASEAN and South America, where demand for EVs is burgeoning. Companies are establishing production bases and leveraging growth opportunities in these regions [para. 68][para. 69][para. 70].

Despite anticipated short-term declines, the consensus remains cautiously optimistic about the future of Chinese automotive exports. The emphasis is on adapting to market dynamics, diversifying export destinations, and accelerating localized production to ensure long-term prospects remain robust [para. 72][para. 74][para. 75].