EU tariffs ‘threaten to disrupt’ Chinese cars brands expansion

EU tariffs of 19% to 46.3% on Chinese Battery Electric Vehicles (BEVs) entering Europe will “potentially” slow growth of Chinese automotive brands in the region.

That’s the view of Owen Edwards, head of Downstream Automotive at professional services business Grant Thornton

“Historically, Europe presented an attractive opportunity for Chinese brands due to its large new vehicle market and lower import tariffs,” said Edwards.

“However, the newly proposed tariffs by the EU, aimed specifically at Chinese BEVs, threaten to disrupt these expansion plans.

“The new tariffs range from 19% to 46.3%, depending on the level of cooperation with the EU’s research.

“These measures are a response to the significant government support that Chinese BEV manufacturers receive, which the EU believes could distort competition and impact the local automotive industry.”

Edwards said with over 30 million new vehicles and 350 million used vehicles sold annually in China, Chinese OEMs see the UK and Europe as prime markets for expansion.

One particular area of concern is that the new tariffs only apply to Chinese BEV imports, while traditional ICE vehicles remain at the lower 10% tariff.

Edwards notes: “Some Chinese brands, like BYD, have indicated a willingness to absorb the increased costs, while others may pass them on to consumers, potentially slowing their growth in the region.”

“In the short term, we may see a slowdown in sales of some Chinese BEVs due to the new import tariffs. However, the impact will likely be less severe for those brands that can absorb the costs.

“Notably, Chinese OEMs like BYD are already planning to manufacture in the EU, with battery plants in Hungary and vehicle plants in Turkey on the horizon. Chery also has potential manufacturing support in Spain. By producing locally, these companies could bypass some tariffs, reducing costs and allowing them to compete more effectively in the European market.”

Philip Nothard, Cox Automotive Insight Director, said: “The implications for the UK market are yet to be fully realised, as the UK government has not yet clarified its stance on import tariffs for Chinese BEVs.

“However, the impact on consumer pricing and brand acceptance could be substantial, as identified by Owen and the Grant Thornton team in our latest Insight Quarterly.”