Automotive News Europe — 2024-06-03
Automotive Industry
Automakers such as BYD have enough margin built into their European prices to absorb even 30% tariffs.
The number of Chinese EVs imported into Europe may not be significantly affected by new tariffs from the EU, several experts said.
That is because Chinese automakers have high margins built in to their European list prices, said Matthias Schmidt of Schmidt Automotive Research. “We assume they will be able to soak of the rise in tariffs largely into their high profit margins and the customer won’t notice any difference,” Schmidt told Automotive News Europe in an email.
The European Commission in the next week is expected to make a decision on at least a temporary increase in tariffs following an investigation into Beijing’s support for the EV value chain in China. The results are expected after EU Parliament elections that conclude Sunday, 9 June 2024.
The Rhodium Group, a China-focused think tank based in New York, said in a report at the end of April 2024 that any new tariffs would have to be as high as 50% (from the current 10%) to have a real impact. Rodium said it expected tariffs close to 30%.
At that rate, the report said, “some China-based producers will still be able to generate comfortable profit margins on the cars they export to Europe because of the substantial cost advantages they enjoy.”
The provisional tariffs would add billions of dollars in new costs for Chinese electric car makers. Some analysts have said that they could sharply cut sales in Europe, but Schmidt said the main impact would be on the Chinese brands’ bottom line.
“They can’t really command a price premium over incumbent brands” he said, “and they will continue at the same price level and operate on lower profit margins.”
30% price advantage
Schmidt said that the investment bank UBS found that Chinese automakers have a 30% price advantage on EVs made in China. Even an increase in tariffs to 25% from the current 10% would still leave a “narrow” margin, he said.
There were about 300,000 Chinese-built EVs sold in Europe in 2023, Rodium said, with a market share of about 19%. The largest single model was the Tesla Model 3, with about 99,500 sales, according to figures from Dataforce. The remainder was fairly evenly split between Chinese brands and non-Chinese brands such as BMW that build cars in China for European sales.
Rhodium compared prices in China and Germany for similar EVs. BYD’s Seal U electric sedan, for example, sells for €21,769 in China but €41,990 in Germany; the BYD Atto 3 compact electric EV sells for €17,923 in China but €37,990 in Germany.
“With such a high EU premium,” BYD “has ample space to adjust pricing,” Rhodium said.