Europe braces for Chinese electric car invasion despite tariffs
Tariffs on Chinese electric cars are set to take effect soon. Negotiations between Brussels and Berlin are ongoing, which might result in the establishment of Chinese brand factories in the EU. However, the automotive industry warns that this could serve as a Trojan horse because the industry across the continent is already struggling.
It has been two weeks since the EU decided to impose punitive tariffs on Chinese electric car manufacturers. Most member states approved the decision to place tariffs on imports of electric vehicles from China. These tariffs are scheduled to start at the end of October, ranging from 7.8% to 35.3%, depending on the manufacturer. With the standard tariffs of 10% already in place, the total could reach up to 45.3% in extreme cases.
Not all members agreed on this issue; for instance, Germany voted against it, which is unsurprising given its status as a powerhouse in the EU automotive sector. China is the EU's third-largest export market for vehicles, following the USA and the United Kingdom.
Assault of Chinese electric cars on Europe
The ACEA reports that over 438,000 electric cars (BEVs), valued at 10.3 billion USD, were exported from China to the EU last year. In contrast, only around 11,500 electric cars, worth 906 million USD, were exported from the EU to China.
In the EU, Chinese-manufactured electric cars captured 21.7% of the market. This includes vehicles with Western brands produced in China. When considering solely Chinese manufacturers, their market share is 7.6%. This may seem modest, but the speed at which Chinese brands are capturing the EU market is remarkable.
In 2020, Chinese brands held just 2% of the EU electric car market. The following year, the market share grew slightly to 2.4%, mainly due to the pandemic's supply chain disruptions. By 2022, Chinese brands increased their share to 4.6%. However, impressive growth occurred in 2023 and 2024, with numerous new brand debuts in EU countries. The European Commission anticipates that by 2025, Chinese brands will comprise 15% of the market.
Chinese cars made in the EU? Negotiations with Beijing continue
It’s not surprising that Ursula von der Leyen recently visited Berlin to discuss tariffs with Chancellor Olaf Scholz. The German automotive industry is experiencing a crisis. The President of the European Commission announced ongoing negotiations with China, even if tariffs are implemented. Chancellor Scholz hopes to reach an agreement by the end of October.
The negotiations cover issues like price commitments and potential investments in Europe, such as local production of Chinese brand cars. However, this could become a modern Trojan horse. Carlos Tavares, CEO of the Stellantis Group, warned in an interview with Reuters that setting up Chinese car factories in Europe might exacerbate the existing production capacity surplus, potentially leading local manufacturers to shut down operations.
Chery Group has already purchased Nissan's former factory in Spain. Just before the tariff decision, Automotive News noted that Chery plans to delay starting production by a year. Geely also intends to utilize part of the future Izera factory in Jaworzno for its needs.
Additionally, Stellantis—despite its CEO’s criticism—has partnered with Chinese brand Leapmotor to produce and sell electric cars outside China, including in the EU. Some demonstration models are reportedly being produced in Tychy, although this hasn't been officially confirmed.
Race to the bottom: What does the European Union accuse China of?
The European Commission's investigation found that Beijing subsidizes the production of electric cars, giving them an unfair price advantage in Europe. " Europe is open for competition. Not for a race to the bottom," stated von der Leyen in September 2023. She emphasized the market disruption caused by these practices.
Eric Zhang, vice president of Chery Automobile, argued that they should be treated like European brands and operate on the same terms; blocking electric car imports from China through tariffs won't suddenly improve the condition of European manufacturers. Thus, he argued, he believed in partnership.
Tariffs won't stop the Chinese offensive
The lack of consensus within the EU isn't surprising to some in the automotive industry. They believe it will be challenging for Brussels to curb China's automotive sector's efforts.
