EU tariffs may not scare off Chinese cars

The customs duties that the EU is likely to impose on imports of Chinese electric cars to the Old Continent may not affect the performance of Asian manufacturers too much. This is according to several analysts and industry experts, including Matthias Schmidt of Schmidt Automotive Research.

As Automotive News Europe reports, Chinese manufacturers "will be able to absorb the increase in customs duties largely thanks to their high profit margins", explained Mr Schmidt, adding that "customers will not notice any difference". The issue is highly sensitive, and the European Union is expected to present a first draft of customs duties in the next few days (or next week at the latest), a subject that is at the heart of the European Parliament election campaign that runs from 6 to 9 June.

Chinese car prices in Europe

According to analysts, the impact of customs duties on Chinese cars will initially be mitigated by the high margins built into European list prices. As early as the end of April, the Rhodium Group, a New York-based think tank focused on China, indicated in a report that the new tariffs would need to be raised to 50% (from the current 10%) to have any real impact.

If they are raised to 30%,"some China-based manufacturers will still be able to generate adequate profit margins on the cars they export to Europe because of the substantial cost advantages they enjoy".

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Schmidt agrees. The analyst told Automotive News that investment bank UBS has found that Chinese carmakers have a 30% price advantage on Chinese-made electric vehicles, so if tariffs were raised from 10% to 25%, there would still be a margin, albeit a "narrow one".

Prices in China and Europe

The number of electric vehicles built in China and sold in Europe in 2023 was around 300,000, with a market share of around 19%.

Rhodium compared prices in China and Germany and found that, for example, the BYD Seal U costs €21,769 in the home country and €41,990 on the German market. The BYD Atto 3, meanwhile, costs €17,923 in China and €37,990 in Germany. BYD therefore has"plenty of room for manoeuvre to adjust prices", comments Rhodium.

However, it should be remembered that in China, where the price war is tight, the impact on profit margins from 2024 is being felt.