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The EU will have to impose huge tariffs of around 50 percent to stem the flow of cheap Chinese electric cars into the bloc, according to new analysis.
Brussels’ major anti-subsidy probe into Chinese electric cars is expected to wrap up within weeks, but researchers at the Rhodium Group say any punitive action is likely to be too timid to deter Chinese carmakers.
“We expect the EU Commission to impose tariffs in the range of 15-30 per cent. However, even if the tariffs come at the higher end of this range, some China-based manufacturers will still be able to generate comfortable profit margins on the cars they export to Europe because of the significant cost advantages they enjoy,” the report says.
“Tariffs in the range of 40-50 percent – arguably even higher for vertically integrated manufacturers like BYD – would likely be necessary to make the European market unattractive to Chinese EV exporters.”
BYD’s Seal U, for example, sells for €20,500 in China and €42,000 in the EU. Estimated profits are €1,300 and €14,300 respectively, providing a strong incentive to export, says Rhodium.
Imports already pay an EU tariff of 10 percent, equivalent to around €2,100 per vehicle.
“According to our calculations, a 30 percent tariff would still leave the company with an EU premium of 15 percent (€4,700) over its China profits, meaning that exports to Europe will remain highly attractive,” Rhodium said – the report.
BYD could even lower its prices to meet its goal of capturing 5 percent of the EU market by 2025 and 10 percent by 2030, the report said. “Many other Chinese EVs will still enjoy a strong EU profit premium.”
Rhodium has calculated that the average punitive tariff across all sectors where the EU has found subsidies is 19 percent if the companies concerned cooperate, as the Chinese car manufacturers BYD, SAIC and Geely have done.
Brussels announced its investigation in October after a surge in imports threatened domestic manufacturers switching from combustion engine vehicles to electric ones.
Imports of electric vehicles from China, including from non-Chinese manufacturers with factories there, rose from $1.6 billion in 2020 to $11.5 billion. in 2023. The market share of Chinese brands more than quadrupled in that time to 8 percent last year.
It is set to hit 11 percent this year and rise to 20 percent by 2027, according to estimates from Transport & Environment, an NGO.
German and US carmakers, which manufacture in China and sell in the EU, are also vulnerable to higher tariffs. Rhodium says a 15 percent tariff would wipe out profits for Tesla’s exports from China to the EU.
Beijing has denounced the investigation as protectionist, saying its companies are simply more competitive.
EU officials told the FT that the interim tasks could come as early as May, although the deadline is July. Permanent duties must win the support of a majority of EU member states and will be imposed in November.
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Rhodium said that massive investment in factories meant that Chinese carmakers were obliged to export to make a satisfactory return.
In 2026, BYD’s annual production capacity in China will reach 6.6 million. electric cars up from 2.9 million by the end of 2023. To absorb this capacity domestically, BYD needs to more than double its sales in a slowing market.
With countries including the US already imposing tariffs and restrictions, the EU has become the market of choice.
Rhodium predicts that EU policymakers in Brussels could use other means to protect the domestic industry. They could limit Chinese imports for safety reasons, given how much data the vehicles collect, or focus consumer subsidies for electric vehicles on EU-made models.
The European Commission said it would complete inspection visits by the end of April and “assess the verified data and information”.
