Why EU tariffs are unlikely to dent Chinese EV makers’ European expansion

Chinese electric vehicles will remain competitive in Europe despite the EU’s additional tariffs on autos made in the country, particularly after they were revised lower last month.

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At a conference in May this year, Chinese behemoth BYD announced its Dolphin model to the European market at less than $21,550. The model is a rebrand of the Chinese Seagull model.

In comparison, Western EV-maker Tesla’s Model 3, the brand’s cheapest offering, is being sold for $44,480 in the United Kingdom. Electric vehicles made by Tesla in China also face a 9% tariff on imports to the EU.

Even with the 17% levy, BYD’s Dolphin model will still be about $23,270 cheaper than the China-imported Tesla Model 3.

To better compete with fierce Chinese rivals, German brand Volkswagen has announced plans to develop a low-cost electric vehicle for the European market at a comparable price of around $21,476 by 2027.

“Now, profitability takes a back seat to market share. The investment community rewards new, innovative EV players on the promise what they could be rather than short-term financial performance that legacy manufacturers are measured,” said McCabe.

“If they really have to kill the EV industry in China, they have to put in 300% of tariffs … which, you know, doesn’t make sense from my perspective,” William Ma, CIO of GROW Investment Group told CNBC’s “Street Signs Asia” on Tuesday.

If the Chinese original equipment manufacturing sector is affected, the risk of retaliatory tariff measures from China against Europe is high, McCabe warned.

EU tariff talks started in June as a response to “unfair subsidies” to Chinese EV makers, which pose “a threat of economic injury” to European EV counterparts.

“This geopolitical or sanction will not go away easily for the next year or two,” Ma said.