The amount of imported electric cars from the EU increased by 90% in 2023, with 54% of imports coming from China. The majority of electric cars exported from China to Europe come from Western automotive manufacturers, including Tesla and BMW, companies taking advantage of China as a manufacturing base.
The market share of the companies in the electric car segment is growing and reached 7.5% in 2023, up from just 1% in 2019.
The new tariffs may slow down the increase in imports from China, however, they will not hinder the development of Chinese car brands in Europe. Instead, this move can change the dynamics of global trade and promote the localization of EV production in Europe.
However, the new tariffs do not mean that Chinese brands will stop penetrating the market. They can still lower prices due to high profit margins, which can range from 40% to 50%.
The sponsorship agreement of BYD for the European football championship this summer, brings a large-scale presence in a previously European-centric public event, signaling the long-term commitment of this car manufacturer to the European market.
Furthermore, with plug-in hybrid electric vehicles (PHEVs) being excluded from the EU’s anti-subsidy investigation and higher proposed tariffs, Chinese car manufacturers may choose to transport more PHEVs to Europe as they become increasingly popular in the region.
This move may lead to increased competition for car manufacturers in Europe as Chinese car manufacturers are now more likely to invest more in production in Europe to be able to sell into Europe while avoiding potential tariffs. This is perhaps also what EU policymakers are hoping for. Even before the new tariffs were announced, some Chinese car manufacturers had plans to shift to Europe.
BYD, the largest electric car manufacturer in China, has chosen Hungary as the location for its first car manufacturing plant in Europe, allowing them to avoid tariffs by producing locally. Other Chinese manufacturers are also diversifying their production outside of China, including Chery, which signed an agreement with EV Motors in Spain to produce cars at their plant in Barcelona.
Meanwhile, the new tariffs may also help European car manufacturers and suppliers to have more time to accelerate the development and supply chain, thus producing better, cheaper EVs to drive new demand.
