The EU may require up to 50pc import duties on Chinese EVs to prevent importing OEMs from undercutting the continent's auto market, a new report from research firm Rhodium Group finds.
Since September last year, the European Commission has been conducting an antitrust probe into suspected unfair trade practices employed by Chinese automakers. In early March, the Commission said it had sufficient evidence to conclude that such subsidies were taking place, and even indicated that potential tariffs could be imposed retrospectively on previously imported vehicles.
Rhodium's report, however, voices concern that for tariffs to have their desired impact, they will need to be higher than the levels that are likely to be implemented.
"Duties in the 40-50pc range — arguably even higher for vertically integrated manufacturers like BYD — would probably be necessary to make the European market unattractive for Chinese EV exporters," Rhodium writes.
The report calculates that EU imports of EVs from China rose from a value of $1.6bn in 2020 to $11.5bn in 2023, amounting to 37pc of all EV imports in the bloc.
The report therefore warns that the levels of tariffs that Rhodium expects the European Commission to introduce will not be sufficient to safeguard European OEMs from intense Chinese competition on home soil.
"We expect the Commission to impose duties in the 15-30pc range. But even if the duties come in at the higher end of this range, some China-based producers will still be able to generate comfortable profit margins on the cars they export to Europe because of the substantial cost advantages they enjoy," the report says.
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Chinese automakers have access to cheaper labour as well as state subsidies in the form of below market rates loans and grants. The nation's leading EV maker BYD yesterday reported that government grants in Q1 had increased to almost RMB1.8bn ($248.5mn).
“China today has a major competitive advantage across the entire electric vehicle value chain. It controls 75pc of the world's battery production capacity, 80-90pc of materials refining and 50pc of rare metals mining,” Renault CEO Luca de Meo wrote last month in a letter to EU lawmakers.
OEM attitudes
But major European OEMs have found themselves in two minds when questioned about potential import duties applied to Chinese competitors. While De Meo draws attention to competitive advantages enjoyed by Chinese firms, Renault's CFO Thierry Pieton said in October that "as a philosophy, we are not into protectionism — we want our vehicles to be competitive in their own right".
The report, however, argues that European OEMs on the whole are split between French players more in favour of levelling the playing field, and German peers who "fear retaliation against their own products in China".
VW Group also has a large market presence in China as well as a joint venture agreement with Chinese OEM Xpeng. German firm Mercedes also has a long-standing Chinese business, although it today guided towards a caution approach to selling its current range BEVs in the country.
This has led to Europe's automotive lobby Acea, which is headed by Renault's de Meo, proposing alternative options to level the playing field without implementing tariffs, chief among which is the suggestion of a pan-European platform for purchasing critical raw materials, as well as low tax zones for designated automotive manufacturing areas.
Rhodium, too, suggests alternatives to blankets tariffs, including tweaking sustainability criteria for European purchase incentives to exclude Chinese EVs, as well as a ban on products made by forced labour. A recent report by non-profit Human Rights Watch found that many OEMs including BYD, Tesla and VW could be procuring aluminium produced with forced labour.
Rhodium says that it expects the EU to introduce provisional tariffs in early July, but also anticipates pushback from one or more member states, as well as likely Chinese retaliatory duties imposed in January 2025.
Ciaran has written about finance, politics and culture. He is passionate about e-mobility and what it means for our way of life.
Ciaran has a Masters in Ancient Philosophy from Oxford University.
