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The new EU tariffs
Following in the footsteps of the US, Canada and other markets,
on Oct. 30, 2024, the EU imposed countervailing duties on battery
electric passenger cars imported from China. This decision follows
a 13-month European Commission anti-subsidy investigation, which
found that the battery electric vehicle (BEV) value chain in China
“benefits from unfair subsidization which is causing threat of
economic injury to EU producers of BEVs.”
The EU is applying these new tariffs — on top of
pre-existing EU vehicle import duties of 10% — based on each
manufacturer's contribution to the investigation and the support
they are thought to have benefited from. Of the three sampled
Chinese exporters, BYD Auto has a tariff of 17%, Geely Group's is
18.8% and SAIC Group's is 35.3%. Other collaborating companies have
a 20.7% duty, although they can request an accelerated review to
establish an individual rate.
This process is similar to what Tesla already requested, which
resulted in its tariff rate of 7.8%. Tariffs for non-cooperating
companies are 35.3%. These tariffs will be in force for five years,
until the end of October 2029, unless the EU chooses to end them
sooner.
Potential alternatives to tariffs
The EU and China are negotiating alternatives to tariffs. One
solution is a “price undertaking,” which would set a minimum price
for imports. The China Chamber of Commerce for Import and Export of
Machinery and Electronic Products initially proposed this solution
on behalf of 12 exporting automakers, while three exporters have
also put forward alternative price undertakings. However, the
European Commission said in its final determination that a “price
undertaking offer must be adequate to eliminate the injurious
effect of the subsidies and its acceptance must not be considered
impractical,” and this is a bar that the proposals failed to
meet.
China's response
China is also pulling other levers to end the tariffs. In
November 2024, China filed a dispute complaint to the World Trade
Organization.
China has also started to apply, or is considering applying,
tariffs to products exported from the EU to China. It has warned
that it could raise the tariffs applied to imported passenger cars
that have large displacement internal combustion engines (ICEs).
China is also looking to apply tariffs to other products, including
EU-sourced cognac, pork and dairy.
Our forecast
Since the European Commission formally introduced — but did
not act on — provisional tariffs in July, S&P Global
Mobility has made adjustments to its sales forecast for EU27
markets that partly reflect the impact these measures will
have.
While we still expect sales volumes of imported Chinese
passenger cars to continue to grow in this region over the next few
years, we have adjusted the forecast volumes downward compared to
our June sales forecast, before the EU announced preliminary
tariffs. Our registration forecast for Chinese-made passenger cars
in EU27 now stands at around 550,100 units. Although this figure is
down from our earlier expectations, it will still be an improvement
over 2023 by 8.1%.
We are adjusting our forecast for Chinese-built passenger cars
registered in EU27 beyond 2024. In S&P Global Mobility's
Light Vehicle Sales forecast for November, the sales ramp-up
from 2025 to 2027 is expected to decrease again. Tariffs will
prevent China-built passenger car sales in the EU27 from reaching
the previously forecasted peak of 1 million units in the second
half of the decade.
The forecast volumes above include not only vehicles from
Chinese brands but also passenger cars built by non-Chinese
automakers. These companies — including Tesla, Renault Group,
VW Group, BMW Group, Honda, Mazda and Toyota — import vehicles
into EU27 from their production sites in China.
How automakers are responding
Beyond the impact of tariffs on BEVs, a key reason for the
decline of imported Chinese-built passenger cars to the EU27 is
non-Chinese manufacturers' plans to move production of some
Chinese-assembled products to Europe toward the end of the decade.
This move would include the Volvo EX30, which will be moved to a
facility in Belgium, and the new generation battery electric Mini
Cooper and Aceman, which will be made in the UK.
Chinese automakers have also taken steps to move production to
EU27 or the surrounding regions. BYD plans to open production sites
in Hungary and Turkey during the next three years, but other
Chinese automakers' plans to make investments in the EU have
cooled. This may be linked to reports that the Chinese government
is putting pressure on its vehicle producers to pause searches for
sites in the region and not sign new deals as negotiations about
the tariffs continue. Those thought to be doing so include Chery
Auto, Chongqing Changan Automobile and Dongfeng Motor Group.
Nevertheless, the door appears to remain open for Chinese
vehicle producers to build assembly plants in Turkey, where rules
allow them to avoid some import tariffs by making local
investments. Thanks to a customs union—an agreement to
eliminate tariffs — between Turkey and the EU, these
investments could allow Turkey to serve as an export hub to the EU
for Chinese automakers. BYD, SAIC Group and Chery have been linked
with Turkish production investment.
Despite the tariffs on BEVs, several factors will come into play
that suggest the impact on Chinese passenger car imports will not
be as significant as it could have been. For example, S&P
Global Mobility expects that Chinese brands will replace some of
the decreased BEV imports to the EU with more imports of ICEs,
hybrids and plug-in hybrids.
At the same time, Chinese brands' pricing strategies may have
allowed them to handle some of the increased costs despite tariffs.
Our analysis suggests that the on-the-road price discrepancy for
some models in China vs. in EU27, especially that seen by Chinese
brands, is unlikely to be solely due to the 10% import tariff and
shipping costs and more likely to OEMs choosing to have higher
prices as part of their EU27 market strategy.
Nevertheless, there will be other knock-on effects from having
fewer Chinese BEV imports to the EU. There could be fewer BEVs
overall registered in the EU, especially if some customers are no
longer interested in switching because the Chinese-made products
don't appeal to them anymore. At the same time, these customers
could also replace existing vehicles with non-BEVs from China or
elsewhere. This would slow the growth of BEVs in the EU27 market
and run counter to the European Commission's current carbon dioxide
reduction targets.
Get updated forecast through 2028: EU BEV Sales (Imported from
China)
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