EU to Announce Increased Tariffs on Chinese Electric Vehicles
The European Union is poised to announce a significant increase in tariffs on Chinese electric vehicles (EVs), a move aimed at countering the influx of low-priced, subsidized imports. This decision, expected to be revealed this week, underscores the EU’s efforts to protect its domestic EV industry from aggressive Chinese competition.
Impending Tariff Hike
Currently, the EU imposes a standard 10% duty on imported EVs. However, starting July 4, this rate is expected to rise substantially for Chinese EVs. Analysts from Citi predict the tariff could increase to approximately 25-30%, with a risk scenario suggesting a potential hike to as much as 30-50%.
Anthony Sassine, Senior Investment Strategist at KraneShares, anticipates the new tariffs will range between 10% and 20%, though he notes they could be at the higher end of that spectrum following the recent European Parliament elections. Ursula von der Leyen, President of the European Commission, has been a vocal advocate for a “de-risking” strategy from Beijing, further bolstering expectations of stringent measures. 
Investigating Subsidies and Economic Threats
The European Commission initiated an investigation in October to scrutinize subsidies provided to Chinese EV manufacturers. The EU alleges these subsidies pose a significant economic threat to its EV industry by enabling Chinese manufacturers to offer their vehicles at lower prices.
Despite the anticipated tariff hikes, some analysts believe the impact on Chinese EV pricing will be minimal. Sassine commented, “The Chinese manufacturers are so efficient and ahead of the curve that tariffs like this won’t significantly affect their pricing. They will still remain more competitive than their EU counterparts.”
Global Response to China’s EV Boom
China’s EV industry has rapidly expanded due to substantial government incentives and support, leading to concerns about overcapacity in markets like the U.S. and Europe. In response, various countries have implemented their own measures. The U.S. hiked tariffs on Chinese EV imports to 100% in May, while Turkey recently announced an additional 40% tariff on vehicles imported from China.
Chinese EV Makers Expand in Europe
Despite the looming tariffs, Chinese EV manufacturers are aggressively expanding their presence in Europe. Companies such as Xpeng and BYD recently showcased their models in Europe, and Nio opened a new showroom in Amsterdam. BYD has also announced plans to build a new factory in Hungary, while Chery has entered a joint venture in Spain to develop new EVs.
Cedomir Nestorovic, Professor of Geopolitics at ESSEC Business School, highlighted that numerous Chinese manufacturers are now exploring opportunities in the EU. “They will try to avoid all kinds of tariffs,” Nestorovic stated, noting the strategic moves by Chinese automakers to establish production facilities in Europe.
Strategic Implications for Chinese Manufacturers
By setting up factories within Europe, Chinese automakers aim to circumvent potential tariffs and ensure competitive pricing. Nio, for example, is considering Hungary as a location for its new factory. Sassine remarked, “Chinese automakers are strategically positioning themselves within Europe to mitigate tariff impacts. While this strategy is likely to work in Europe, the U.S. poses a different challenge.”
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