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Deep Dive: EU adds 17.4% to 38.1% import tariffs on Chinese EVs.

Caution! Deep Dive ⚡

I promise I’ll stop leading out with EV policy deep dives soon. These tariff games are important because they directly influence what I call “the EV flow” of the world.

I’m sure we’ll be referencing back to these changes when we’re witnessing the causes of these down the road in the future newsletters.

The two large policy ‘causes’ I’m talking about here are the US quadrupling China EV import tariffs (25%→100% as we reported a month ago here) and the European Union now imposing its tariffs on China EV imports:

European Commission completed their first investigation into three Chinese automakers, and announced the new tariffs between 17.4% and 38.1%. (link)

Currently, the EU has 10% import duty on EVs coming from China, but this will change from 5th of July. I’ve now confirmed that these new tariffs will be added additionally to the 10%. These tariffs will be entered into force on a provisional basis, and proposals for permanent measures will come in November 2024.

Here are the tariffs for the three companies that were “sampled", aka investigated from the 21 cooperating automaker groups:

BYD: 17,4%

Geely: 20%

SAIC: 38,1%

The other automakers that cooperated, but are not yet sampled, will be subject to the 21% weighted average duty.

The EV makers that were not cooperating with the investigation will be hit with 38.1%. SAIC’s high import rate is claimed to be because it was “uncooperative”.

The investigation included a detailed questionnaire from these companies (you can find the sampling form on the site), and then followed by visits to about 100 production sites in China.

While it’ll be difficult for SAIC with its 10+38.1% tariffs to operate in Europe, per the data we’ve gathered so far, BYD will still be able to turn a decent profit with the 10+17.4% tariffs.

There is a special note in the press release about Tesla, too:

"Following a substantiated request, one BEV producer in China – Tesla – may receive an individually calculated duty rate at the definitive stage.”

The “substantiated request” is likely what we wrote about in our Teslaverse issue #9 here. It’s safe to presume Tesla will be left with a 21% rate until then.

The “definitive stage” here means the third phase of this investigation and tariffs, which will take place between 6th September and Definitive Measures will apply, after a vote, on 2nd November 2024. (link)

There is a slight glimmer of hope left in the press release too, that the duties will be introduced on the 4th of July only go into effect “should discussions with Chinese authorities not lead to an effective solution.”

So, although going into effect, these tariffs aren’t final. Yet.

A response from China Chamber of Commerce to the EU (link):

“We are shocked and gravely disappointed. Rates spanning from 17.4% to 38.1% will pose a SERIOUS market barrier.”

How many imported Made-in-China EVs are we talking about right now? T&E created a good chart to visualize the current share of sales and forecast (link):

In related news, Volvo (majority-owned by Geely with that +20% tariff increase there), has already begun relocating the production of its China-made EVs EX30 and EX90 to Belgium. (link)

In probably related news, Great Wall Motor, in Europe operating as GWM and selling the cheap EV Ora, is about to close its European HQ in Munich in August and halt the market expansion. (link)

There are potential winners here too: European contract manufacturers. One of such is Magna Steyr (link in 🇩🇪 ):

„Over the last twelve months, we have seen very strong activity from all the Chinese OEMs who have contacted us and who want and need to localise.“

— Roland Prettner, head of the contract manufacturer Magna Steyr in Graz

Turkey imposes its own

In adjacent and probably-not-a-coincidence news: Turkey (not an EU member state) announced it’ll impose a 40% additional import tariff to vehicles from China, starting from July 7th with a minimum of $7,000 per vehicle.

Since Tesla just started selling in the country, will that leave the Turkish market just with the Model Y (made in Berlin), and not the Model 3 (made in Shanghai)?

For context on Turkey, you might’ve noticed that it won the “best in EV growth” position in our EV Sales 2023 analysis by growing 734.3%, from 7,733 EVs to 64,515 EVs sold just within one year. It is the new state-owned and locally best-selling EV maker, Togg, is who they are protecting with these anti-China measures.

What will the tariffs really change?

Caution: Jaan’s rant ahead.

While the tariffs will level the playing field between the European domestic EV makers and Chinese incoming EVs on profits they earn, it does serve as a very clear countermeasure to the EV adoption itself, at least in the near term.

We’ll get less affordable EVs left for us, the EV drivers and owners. This tariff hike will give all the more reason for domestic makers to not innovate and delay their EV ambitions, as their runway against the competition — albeit just by a few years — increases.

As I wrote in our last newsletter, the real winners here are now the “rest of world” countries outside EU and US, as without protectionist measures they’ll let the EV boom truly take off. Now, there will be even more incentive for Chinese EV makers to focus on those other markets.

Latest example: BYD just reached its 100th dealership in Brazil and plans 250 by the end of the year. Also just opened its first showroom in Saudi Arabia (link), making it the 80th country or region BYDs are sold worldwide.

And some of the wiser European automakers will do the same too — for example, I wrote about Stellantis’ grand plans with Leapmotor to start conquering the ‘Rest of World’ markets in addition to European presence.

All we can hope for is that the European automakers take these few years they’ve given (not more as Chinese EV makers will start producing locally and partnering up), and actually use the time to build out proper and competitive EV production capacities.

There’s also the wild card of UK in question here, as now being outside EU and it’s EU→←UK EV tariffs postponed until 2027, it might serve as a little loophole for a while?

I’d love to know what you think of these tariffs — comment below!

— Jaan

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