Europe braces for Chinese EV wave despite new tariffs
Soon, tariffs on Chinese electric cars are set to come into effect. Negotiations between Brussels and Berlin are ongoing. The result could see Chinese brand factories established in the EU. However, the automotive industry warns that this could effectively be a Trojan horse, as the sector across the continent is already struggling.
It has been two weeks since the EU dealt a significant blow to Chinese electric car manufacturers. At that time, most member states gave the green light to impose punitive tariffs on imports of electric vehicles from China. These tariffs, set to come into effect at the end of October, will range from 7.8% to 35.3% depending on the manufacturer. They will be added to the standard tariffs of 10%, meaning that in extreme cases, tariffs could reach 45.3%.
There was no unanimity on this issue. Germany voted against it, which should not be surprising as it is an automotive powerhouse in the EU. China is the third-largest export market for vehicles for the European Union, after the USA and the United Kingdom.
Assault of Chinese electric cars on Europe
The ACEA calculates that just last year, over 438,000 battery electric vehicles (BEV), worth approximately £8.5 billion, were exported from China to the EU. In the same period, a mere 11,500 electric cars worth about £750 million were exported in the other direction.
In the European Union, Chinese-manufactured electric cars captured 21.7% of the market, including Western-branded cars produced in China. When only considering Chinese manufacturers, their share is 7.6%. This may seem modest, but the pace at which the Chinese are capturing the EU electric car market is impressive.
In 2020, Chinese brands held only 2% of the electric car market in the EU. Growth was slight the following year—rising to 2.4%—mostly due to the pandemic, which disrupted global supply chains in the automotive industry. In 2022, the Chinese rebounded to 4.6%. However, only 2023 and 2024 brought a significant number of new brand debuts in EU countries. The European Commission forecasts that by 2025, Chinese brands will account for 15% of the electric car market.
Chinese cars made in the EU? Negotiations with Beijing continue
It's no surprise, then, that Ursula von der Leyen visited Berlin at the beginning of the week to discuss tariffs with Chancellor Olaf Scholz. The German automotive industry is in crisis. The President of the European Commission announced in the German capital that negotiations with China will continue, even if tariffs come into effect. Scholz, however, hopes to reach an agreement by the end of October.
Strong discussions include price commitments and investment issues in Europe, such as the potential production of Chinese brand cars locally. However, these could be modern-day Trojan horses. Carlos Tavares, CEO of the Stellantis Group, warned in an interview with Reuters that setting up Chinese car factories in Europe will only increase the overproduction capacity in the region and lead to some local manufacturers closing factories.
The Chery group has already decided to proceed by purchasing a former Nissan factory in Spain. Just before the tariff decision, Automotive News reported that Chery plans to delay the start of production by a year.
Additionally, the Stellantis group—the same group whose CEO criticises the opening of Chinese car factories in Europe—has entered into a partnership with the Chinese brand Leapmotor. It will produce and sell their electric cars in markets outside of China, including the EU. Production of the first demonstration models is allegedly taking place in Tychy, although the group has not confirmed this officially.
Race to the bottom: What does the European Union accuse China of?
The European Commission conducted an investigation which proved that Beijing subsidises the production of Chinese electric cars, giving them a price advantage in the European market. "Europe is open to competition, but not to a race to the bottom," said von der Leyen in September 2023. "This disrupts our market."
"I believe that we should be treated like European brands and operate on the same terms," said Eric Zhang, vice president of Chery Automobile, the leading exporter of Chinese cars. "Blocking the import of electric cars from China, which I interpret as potential punitive tariffs, will not make the condition of European manufacturers suddenly improve. I believe in the power of partnership," he told money.pl.
