EU plans to make Chinese electric cars more expensive

With accusations that China is selling electric cars at artificially low prices, the European Union is expected to impose tariffs on these vehicles and make it expensive this week. The BYD Seagull, an affordable and compact electric vehicle (EV), is an example of China’s growing EV industry. In China, it starts at 69,800 yuan ($9,600; £7,500), but European regulations would likely double its price if it were sold there, though it would still be considered inexpensive for an EV.

European manufacturers are concerned about this competition. They fear the Seagull and other Chinese models could dominate their markets, outcompeting local brands. China’s auto industry has grown rapidly over the past two decades, driven by the “Made In China 2025” strategy, resulting in companies like BYD competing with global giants like Tesla. In 2023, China sold over eight million EVs, about 60% of the global total.

European and US policymakers worry that Chinese brands, supported by substantial subsidies, will outcompete their domestic companies. A UBS report indicated that BYD could produce cars at 25% lower costs than other global carmakers, enabling Chinese firms to offer high-tech, low-cost EVs worldwide. The Alliance for American Manufacturing even warned that the influx of cheap Chinese cars could devastate the US auto industry, prompting the Biden administration to increase tariffs on Chinese battery-powered cars from 25% to 100%, making it expensive.

The EU is expected to take a moderate approach compared to the US. European Commission President Ursula von der Leyen announced an investigation into Chinese EV imports, criticizing their low prices due to state subsidies. The EU is likely to raise tariffs on Chinese EVs to 20-25%. While this is seen as a way to level the playing field, it could also impact European companies like BMW and Tesla, which manufacture cars in China for export to Europe. Additionally, European carmakers fear Chinese retaliation through expensive tariffs on high-value exports to China.

European executives have expressed concerns about the tariffs. Volkswagen’s CEO warned of potential retaliation, while BMW’s CEO advised against engaging in trade battles. Mercedes-Benz’s CEO suggested lowering tariffs to encourage competitiveness among European companies. French manufacturers are also divided on the issue, with Stellantis’ CEO calling tariffs a “major trap” and Renault’s CEO advocating for fair competition and a strong European industrial policy.

The UK is monitoring the situation, with its Trade Remedies Authority ready to investigate if requested. Ultimately, expensive tariffs might give Europe time to adapt to the challenge from China, but many in the industry believe that more comprehensive strategies are needed for Europe to remain competitive in the global automotive market.

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