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EU to Hike Chinese EV Tariffs, Could Reach 50%

EU to Announce Tariff Hike on Chinese EVs, Potentially Raising Rates to 25-50%

6/11, 03:28 EDT
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Key Takeaway

  • The EU is set to raise tariffs on Chinese EVs from the current 10% to potentially 25-30%, with a possibility of up to 50%.
  • Despite higher tariffs, Chinese EV manufacturers like Xpeng, BYD, and Nio are expanding in Europe by setting up local factories.
  • The U.S. has already increased tariffs on Chinese EV imports to 100%, reflecting global efforts to protect domestic EV industries.

EU Tariff Rate Plan

The European Union is set to announce its new tariff rate plan for Chinese electric vehicles (EVs) this week, as part of its strategy to address low-priced, subsidized imports. Currently, the EU imposes a standard 10% duty on imported EVs. However, starting July 4, these fees are expected to be provisionally increased for Chinese EVs. Citi analysts have projected that the tariff rate could be raised to approximately 25-30%, with a 40% probability of a hike to 30-50%. Anthony Sassine, senior investment strategist at KraneShares, anticipates the tariff rates to be "between 10% and 20%" but suggests that they "could see this being on the higher end of the 20%" following the recent European Parliament elections.

Ursula von der Leyen, president of the European Commission, has been a proponent of a "de-risking" approach from Beijing. The European Commission initiated an investigation in October into subsidies provided to Chinese EV manufacturers, alleging that these subsidized imports pose an economic threat to the EU's EV industry. Despite these concerns, Sassine remarked, "But the Chinese manufacturers are so efficient, are so ahead of the curve, that tariffs like this – I don’t think will impact too much the pricing here. They will still be more competitive than their EU counterparts."

Global Tariff Trends

The issue of Chinese EV imports is not confined to Europe. The U.S. has also expressed concerns about the potential overcapacity of China's EV industry. In March, U.S. Energy Secretary Jennifer Granholm warned that China could flood the U.S. market with its EV offerings. President Joe Biden echoed these concerns, leading to the U.S. administration announcing new tariffs in May. The tariffs on Chinese EV imports were increased to 100%, up from the previous 25%.

Turkey has also taken steps to address the influx of Chinese EVs. On June 8, Turkey announced an additional 40% tariff on imports of vehicles from China. These moves reflect a broader trend of countries seeking to protect their domestic EV industries from the competitive pricing of Chinese manufacturers.

Expansion in Europe

Despite the ongoing EU probe, Chinese EV makers are actively expanding their presence in Europe. Last month, companies like Xpeng and BYD showcased their models in Europe, while Nio opened a new showroom in Amsterdam. BYD announced plans in December to build a new factory in Hungary, and Chery entered a joint venture with Spain's Ebro-EV Motors in April to develop new EVs.

Cedomir Nestorovic, professor of geopolitics at ESSEC Business School, noted that "scores of Chinese manufacturers are now scouting the EU." He added, "They will avoid, or they will try to avoid, all kinds of tariffs." Sassine from KraneShares commented, "We’re seeing the Chinese automakers actually setting up factories in Europe. Nio, also, is looking at Hungary. So there are options here, and I’m sure there’s back channels happening here." He further stated, "I think with Europe, it’s not going to be a big deal. In the U.S., it’s a different story."

Street Views

  • Citi Analysts (Bearish on Chinese EV imports to the EU):

    "The tariff rate could be hiked to ~25-30% from 10% currently, while our risk scenario (40% probability) envisages a hike in the tariff rate to 30-50%."

  • Anthony Sassine, KraneShares (Neutral on Chinese EV tariffs):

    "I expect the tariff rates to be between 10% and 20%, but could see this being on the higher end of the 20% after the European Parliament elections last week."
    "But the Chinese manufacturers are so efficient, are so ahead of the curve, that tariffs like this – I don’t think will impact too much the pricing here. They will still be more competitive than their EU counterparts."
    "We’re seeing the Chinese automakers actually setting up factories in Europe. Nio, also, is looking at Hungary. So there are options here, and I’m sure there’s back channels happening here... I think with Europe, it’s not going to be a big deal. In the U.S., it’s a different story."

  • Cedomir Nestorovic, ESSEC Business School (Neutral on Chinese EV strategies in Europe):

    "Scores of Chinese manufacturers are now scouting the EU... They will avoid or they will try to avoid all kinds of tariffs."