EU’s EV Tariffs Hurt China, but BYD Expansion Unstoppable

The European Union has imposed further taxes on electric cars (EV) imported from China, citing unfair support for companies undercutting European carmakers. The decision comes as a blow to both the Chinese government, which had been campaigning hard against the levies, and the country’s EV producers. Most corporations will face significant additional tariffs ranging from 17.4% to 38.1%, in addition to the bloc’s existing 10% levy.

The impact on China’s EV manufacturing will vary based on tariff levels and firm cost structures. The hardest hit may be obliged to raise prices or establish operations in Europe.

While Beijing is plainly dissatisfied, economists believe it’s unlikely to want to jump into a full-blown trade war with its second biggest trading partner, especially given domestic economic challenges. Despite the increased charge, market leader BYD, which competes with Tesla as the world’s leading maker of battery electric vehicles, has room to develop in Europe, according to Gregor Sebastian, a senior analyst with the Rhodium Group.

With the lowest additional levy of 17.4%, BYD may emerge as a relative “winner,” he claimed. Duties at this level may even allow BYD to lower its already competitive prices in order to increase market share in Europe.

“BYD is already building a factory in Europe, is likely to still profitably export to the EU even with 17% duties, and can export plug-in hybrids without additional duties,” Sebastian stated. The new rates only apply to battery EVs.

According to Rhodium, BYD’s European profits are 45% higher than those in China, indicating that the market will remain attractive even with new tariffs. Europe is crucial to Beijing’s EV goals. It surpassed Asia as China’s largest EV export market in 2021. This helped China become the world’s top auto exporter.

“One critical issue for China is that the EU accounted for 38% of China’s EV exports in 2023,” Sebastian stated. “China will not be able to reroute exports to other countries as potential alternatives like Brazil, Turkey and the US have also pulled up drawbridges.”