China tariffs will 'damage' European firms – Tavares

Stellantis CEO fears putting up the barriers in Europe could blunt European OEMs' appetite to compete in BEVs globally

China tariffs will 'damage' European firms – Tavares
Stellantis CEO Carlos Tavares fears new tariffs will lead to a lack of competition in other global markets

Stellantis CEO Carlos Tavares has criticised new EU tariffs on Chinese EVs, saying that European firms' global competitiveness will be "damaged" by the policy.

Tavares joins the ranks of several large European automakers who have come out against the new policy owing to fears either that European manufacturers risk losing competitiveness against technologically advanced and affordable EVs, or their own China positions being put in jeopardy by Chinese retaliation.

"If we find ourselves protected in a bubble, our ability compete everywhere else in the world is going to be damaged because we will not be facing the harshest competition as a consequence," Tavares said during Stellantis' investor day.

Stellantis' concern differ slightly from its German rivals, however, when it comes to its own Chinese operations. The firm's investment into Chinese firm Leapmotor aims to bring affordable Chinese-made EVs into the European market, and while management says the operation will not be "hugely material" on its balance sheet, its fate is now unclear.

As Chinese OEM partners go, Leapmotor is positioned firmly in the affordable market segment, while the likes of BMW's Chinese market presence steers clear of the harshest competition in the mass market.

Since Stellantis' main presence in China is now investment in a local OEM, rather than its own JV company — as is the case for BMW — Stellantis may be less susceptible to potential retaliatory tariffs from China. However, it remains to be seen if any such retaliatory duties will find ways to target alliances like Stellantis-Leapmotor and VW's projects with SAIC and Xpeng.

"In the mid and long run, being protected is not what is going to make our companies more competitive," Tavares says. "This is a very open competition in the worldwide automotive market. We are competing in a very dynamic way against all the other brands, all the other car makers.

Tavares says Stellantis' own analysis finds that Chinese OEMs are coming to Europe with a "30pc cost competitive edge", meaning that the rates which are set to be applied to large Chinese players BYD and Geely will be sufficient only to offset these advantages, not price them out of the European market entirely.

But Tavares' biggest concern appears to be the impact on Europe's OEMS that still face the prospect of having to compete with Chinese EVs in other global markets without similar tariffs.

"Even if we would be protected in some parts of the world, we still have to compete everywhere else in the world against those very harsh competitors," the CEO says. "What we say is that it is better to compete and make sure we use this harsh competition to progress faster to bring our cost, our quality, our cost competitiveness to the best level in the world."

The incentive — and the opportunity afforded by its Leapmotor tie-up — to improve cost levels should still be present for Stellantis, if indeed it does go head-on against Chinese automakers in Asia and the Middle East, a prospect to which CFO Natalie Knight recently alluded. Tariff-free competition against Chinese OEMs is, after all, what Tavares is openly calling for in Europe.

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And protection against an influx of affordable Chinese competition will not ease the pressure to lower costs across the board for Stellantis. Tavares admits that mounting inventories mean the firm will have "a very unbalanced year", and that cost cuts of 40pc are the firm's eventual aim.

"There are plenty of opportunities for our consumers to grasp in our dealerships at all of our our brands, and we are going to manage that in a progressive and thoughtful manner until the end of the year," he adds.

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