The European Union’s recent decision to set tariffs on China-made electric vehicles has significant implications for the global electric car market. The EU’s move, which sets tariffs on Tesla’s China-made vehicles considerably lower than those imposed on rival electric carmakers, could potentially boost Tesla’s future sales in the region.
The decision to lower tariffs on Tesla’s vehicles comes after the EU hiked tariffs on all electric cars imported from China two months ago. The EU cited „unfair“ state subsidies that benefited Chinese electric vehicle makers at the expense of European manufacturers. Tesla, which exports many of the cars it makes in China to Europe, had requested a recalculation of the initial 20.8% tariff rate set by the EU. The European Commission, the EU’s executive arm, ultimately set the tariff rate for Tesla at 9%, on top of the existing 10% duty on all electric vehicle imports.
This lower tariff rate for Tesla reflects the „level of subsidies“ the company receives in China, according to the European Commission. Gregor Sebastian, a senior analyst at think tank Rhodium Group, expressed surprise at the 9% tariff rate for Tesla, pointing to local government loans and subsidized batteries from Chinese battery maker CATL as factors that may have influenced the decision.
In contrast, other Chinese automakers like SAIC, Geely, and BYD face additional tariffs ranging from 17% to 36.3%. SAIC, the major competitor to Tesla in Europe, has been hit with a 36.3% tariff, while Geely and BYD face tariffs of 19.3% and 17% respectively. These tariffs are slightly lower than initially proposed following a more thorough investigation and input from the automakers, the Commission stated.
Despite the higher tariffs, Chinese EV makers are unlikely to give up on the European market, which accounted for more than a third of their exports last year. Chinese automakers enjoy a „large margin“ on their sales in Europe, according to automotive research analyst George Whitcombe. BYD, for example, has not raised prices in Europe despite the additional tariff, as the company has the ability to absorb the costs due to lower production costs.
Looking ahead, Chinese EV makers may explore options to mitigate the impact of tariffs, such as ramping up exports of plug-in hybrid electric vehicles or manufacturing cars in Turkey for the EU market, as imports from Turkey are not subject to tariffs. Regardless of the challenges posed by higher tariffs, Chinese EV makers are likely to continue their efforts to expand their presence in the European market.