A potential shift in Europe’s automotive industry
The EU entered negotiations with China to consider setting minimum prices on Chinese-made electric vehicles (EVs) instead of tariffs on Thursday. Last year, the EU imposed up to 45.3% tariffs on Chinese-made EVs after the European Commission found that China’s car industry benefited from “unfair subsidization,” according to Autocar. Major Chinese automakers like BYD, Geely, and SAIC Motor face 17%, 18.8%, and 35.3% tariffs from the EU, respectively. These levies, which exempt plug-in hybrid (PHEV) models, are in addition to the EU’s standard car import duty of 10%. EU trade commissioner Maros Sefcovic said any minimum prices would have to be as effective and enforceable as the EU tariffs, noting that a single minimum price would not be enough to counter injury caused by subsidies, Reuters reports.
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Experts like Zeng Zhiling, automotive market director for Asia Pacific at consulting firm GlobalData, believe that minimum prices are more beneficial to Chinese EV manufacturers than tariffs. “High tariffs would sacrifice their profits, while a minimum price would help maintain profit margins,” Zeng told Yicai Global. “Against the backdrop of the US’ ‘reciprocal tariffs,’ China and the EU may quickly resolve some trade disputes to prevent trade frictions from escalating.”
The EU and China agreeing on trading tariffs for fixed minimum prices could also be detrimental to Tesla, who has been struggling in Europe recently. Despite the Model Y Juniper’s launch, Tesla’s sales were down in every single European country except the UK during Q1. Swapping tariffs for fixed minimum prices would likely result in more Chinese EVs entering Europe, intensifying competition for Tesla.
Some Europeans want Chinese cars
Levies on Chinese EV imports didn’t receive universal support in Europe. Germany’s automobile manufacturers’ association opposed the tariffs, fearing they could make their members vulnerable to retaliation from China, where a third of their cars are sold, according to Forbes. Europe’s sales of Chinese EVs fell 3.4% in February, with the country’s domestic EV sales rising 26% the same month. However, sales of all types of Chinese cars, including EVs, PHEVs, and mild hybrids, rose by 64% in February, highlighting Europe’s interest in Chinese automotive products despite lower BEV sales stemming from tariffs. In January and February, tariff-exempt PHEVs exported from China into Europe saw an 892% increase to 25,900 units, EV Magazine reports.
As a result of Brexit, the EU’s levies on Chinese EV imports don’t apply to the UK, whose leaders state they have no future plans to impose their own tariffs. However, BYD is still moving forward with its expansion plans into Europe, as its Seagull, one of China’s most popular and affordable EVs, is coming to the continent in 2025 under the name Dolphin Surf. The Seagull starts at $7,500 in China, and the Dolphin Surf is anticipated to have a base price under $26,000 because of its additional safety features.
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Final thoughts
More details must emerge from negotiations between the EU and China before a policy change’s forecasted impact on consumers materializes. While the EU imposing minimum prices on Chinese EV imports could protect their domestic manufacturers, drivers may be stuck with higher car costs. Minimum prices could also hurt the EU’s goal of getting 30 million zero-emission vehicles on its roads by 2030. By 2035, the EU hopes to make new car and van sales exclusively zero-emissions.
