Could tariffs lead to more expensive Chinese EVs?
The European Commission is placing large tariffs on EVs imported from China, claiming government subsidies give them an unfair price advantage compared to local manufacturers. Could the UK follow suit?
Demand for electric vehicles is growing quickly in Europe. According to industry body ACEA, more than 1.5 million battery-electric cars were registered across the European Union during 2023 – a 37% year-on-year increase[1]. Almost a quarter (21.7%) of them are imported from China[2], and the European Commission is investigating how this growing market share could affect local production.
What are the proposed tariffs on Chinese EVs?
They vary. The Commission launched a call for evidence in October 2023, working with European and Chinese OEMs, importers, suppliers, and industry associations. This information was used to calculate government subsidies available to different manufacturers and set tariffs.
Those tariffs came into force on 5 July 2024, and they’re applied on top of the 10% duty already levied on imported electric vehicles. Three manufacturing groups (representing 39% of exports to the EU) were sampled in detail, and each has individual tariffs based on the level of subsidies and/or the amount of evidence supplied[3]:
- BYD – 17.4%
- Geely – 19.9%
- SAIC – 37.6%
Manufacturers who co-operated with the investigation but weren’t sampled are subject to a 20.8% tariff, while the highest rate of 37.6% will be applied to those who didn’t participate at all. Definitive tariffs will be set out in November and apply for five years[4].
Why does China have an advantage?
The Chinese government has subsidised electric vehicle research and development, sales and infrastructure since 2009 – investing almost US $231bn (£180bn) by the end of 2023, according to the Center for Strategic and International Studies[5].
It’s created the world’s largest EV market, a mature supply chain for the materials and components other OEMs need as they accelerate their electrification plans, and concerns from other regions that local production can’t compete. In May 2024, the United States increased tariffs on Chinese electric vehicle imports from 25% to 100%[6].
Could the UK introduce tariffs too?
The UK Government hasn’t indicated that it will mirror the EU’s tariffs, but parliament was dissolved for the General Election when the Commission announced rates in June.
Labour policies support a growing EV market. It has previously indicated that it would restore the 2030 ban on new non-hybrid car and van sales, which was pushed back to 2035 last year[7], but this doesn’t affect battery-electric vehicles anyway.
However, tariffs could affect wider supply chains. The Chinese government has introduced several measures this year designed to control exports of rare earth metals used for batteries and magnets in motors[8]. Although the European Commission is supporting efforts to localise production, this could impact prices as demand continues to grow.
REFERENCES:
[1] ACEA. (2023). New car registrations +13.9% in 2023; battery electric 14.6% market share. [online] Available at: https://www.acea.auto/pc-registrations/new-car-registrations-13-9-in-2023-battery-electric-14-6-market-share/ [Accessed 9 Jul. 2024].
[2] ACEA. (2024). Fact sheet: EU-China vehicle trade 2024. [online] Available at: https://www.acea.auto/fact/fact-sheet-eu-china-vehicle-trade-2024/ [Accessed 9 Jul. 2024].
[3] European Commission. (2024). Regulation (EU) 2024/1866 - imposing a provisional countervailing duty on imports of new battery electric vehicles designed for the transport of persons originating in the People’s Republic of China. [online] Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:L_202401866 [Accessed 9 Jul. 2024].
[4] European Commission. (2024). Q&A on EU-China trade relations. [online] Available at: https://ec.europa.eu/commission/presscorner/detail/en/QANDA_24_3232 [Accessed 9 Jul. 2024].
[5] Center for Strategic and International Studies. (2024). The Chinese EV dilemma: subsidized yet striking. [online] Available at: https://www.csis.org/blogs/trustee-china-hand/chinese-ev-dilemma-subsidized-yet-striking [Accessed 9 Jul. 2024].
[6] The White House. (2024). Fact sheet: President Biden takes action to protect American workers and businesses from China’s unfair trade practices. [online] Available at: https://www.whitehouse.gov/briefing-room/statements-releases/2024/05/14/fact-sheet-president-biden-takes-action-to-protect-american-workers-and-businesses-from-chinas-unfair-trade-practices/ [Accessed 9 Jul. 2024].
[7] Autocar. (2023). Labour would reinstate 2030 ban on new ICE car sales. [online] Available at: https://www.autocar.co.uk/car-news/electric-cars/labour-would-reinstate-2030-ban-new-ice-car-sales [Accessed 9 Jul. 2024].
[8] Politico. (2024). Precious rare earth metals belong to the state, China declares. [online] Available at: https://www.politico.eu/article/precious-rare-earth-metals-belong-to-the-state-china-declares/ [Accessed 9 Jul. 2024].
Important information:
This blog was originally published on leaseplan.com website. The views expressed may no longer be current and any reference to specific vehicles or products is for reference only. This information is not a personal recommendation for any particular vehicle, product or service - if you are unsure about the suitability of a product, you should consult with an expert.
