If Chinese electric cars are stopped, Europe will not fall in love with American pickups

Privy Council No. 10

2024-06-12 23:51Published on the official account of Privy Council No. 10 under Hainan Global Times

The picture shows a BYD freighter docked in Bremerhaven transporting thousands of electric vehicles at once.

1. Is the EU really going to follow the United States in taxing this time, and how much is it going to collect?

The European Union will impose additional tariffs of up to 38.1% on EV imports from China from next month. The European Commission announced on June 12 that if a solution cannot be reached with China, the tariffs will be imposed around July 4. The European Commission said it would impose tariffs of 17.4%, 20% and 38.1% respectively on BYD, Geely and SAIC, depending on its "suspected level of government assistance"; Other EV manufacturers in China that cooperated with the survey but did not sample separately: 21%; Other BEV manufacturers in China that did not cooperate with the survey: 38.1%.

Tesla vehicles imported from China may be subject to separate tax rates. The new tariffs are on top of the EU's existing 10% tariff. The new tariffs are considered to have exceeded previous expectations.

At present, our country imposes a 15% tariff on electric vehicles in the European Union.

2. Why didn't Germany stop it?

According to the American "Political News Network", Germany is still trying to take action at the last moment, hoping to keep the tariffs as low as possible.

German Chancellor Olaf Scholz recently warned of "isolated and illegal tariff barriers...... It will only make everything more expensive and make everyone poorer in the end. ”

According to the "Political News Network", Germany, Sweden and Hungary in the EU are opposed to raising taxes on Chinese electric vehicles this time.

Geely is one of the Chinese companies under investigation, owning Sweden's Volvo. Swedish Prime Minister Kristersson, who has been attracting Chinese investment in electric vehicles, joined Scholz and Hungarian Prime Minister Viktor Orban in speaking out against EU tariffs.

But the three leaders will need to win over at least 11 other governments to overturn the European Commission's tariff decision. The tariffs notified today are a temporary measure, after which the European Commission will have four months to consult with member states on whether to make the temporary tariffs permanent. EU member states will be asked to vote on tariffs by November 2. Once determined, this tariff is usually levied for 5 years.

According to the Financial Times, in the past four months, Central European countries such as the Czech Republic and Slovakia are expected to join the opposition camp.

3. Is this an economic decision or a political decision?

The EU's decision is clearly to follow the US, and in terms of tax rates, the EU has made a surprising breakdown of different Chinese companies. So, this is a political decision that has been calculated economically. It seems to be measuring the bottom line of Chinese companies' profits, so as to "precisely protect" the price competitiveness of European products.

Previously, some European automakers believed that a tariff increase of about 20%-30% would "provide them with some breathing space", but now once this tariff is implemented, the EU can almost squeeze most of China's electric vehicles out of the door, and even if they survive, profit margins will be minimized.

The EU is completely trying to stand with the United States and "decouple" from China. It was a naked political decision.

Therefore, on the evening of the 12th, the China Association of Automobile Manufacturers issued a statement saying that it was "deeply regretful" and said that it was "resolutely unacceptable".

4. What kind of retaliation will Europe face?

The FT said many EU automakers have condemned the tariffs, fearing that China could "retaliate" and that China would prevent their cars from entering the Chinese market. In 2022, European brands accounted for about 6% of EV sales in China. In addition, food and luxury goods exporters such as Italy are also worried about retaliation from China.

In addition to brandy from France, pork and dairy products were previously predicted by the Western media, which exported nearly 5 billion euros to China in 2023 – a quarter of the EU's agricultural exports to large Asian countries.

Copa-Cogeca, Europe's largest farmers' lobby, has said they don't want to get caught up in the crossfire of the EU-China trade war. "The size of the Chinese market is so large that no one can ignore it."

5. Will the development of electric vehicles in China be affected?

The EU has already gone through a period of so-called "countervailing investigation and evidence collection" before imposing tariffs on Chinese electric vehicles. An interesting figure is that just as the EU launched the countervailing investigation, Chinese electric vehicles experienced "explosive" growth in the European market, according to the Financial Times reported on the 4th of this month, the number of Chinese-made electric vehicles registered in Europe from January to April this year increased by 23% year-on-year. The low price and wide range of equipment make Chinese electric vehicles attractive to Western consumers.

It is also interesting to note that while the EU is considering using tariffs to block Chinese electric vehicles, the pace of competition among European countries for Chinese electric vehicles to set up factories and jobs in their countries is not slow at all.

Pictured above is a BYD store in Milan

Hungary received the first factory investment from a Chinese automaker in Europe, producing around 500,000 cars in 2023.

Benefiting from Spain's €3.7 billion plan to attract electric vehicles and battery factories, launched in 2020, Chery will start production at a former Nissan plant in Barcelona later this year with a local partner.

A source with knowledge of the company's plans told Reuters that Chery also plans to build a second, larger factory in Europe and has been in talks with the governments of countries including Italy.

The current competitiveness of China's electric vehicles is obvious to all. According to the International Energy Agency, the global demand for new energy vehicles will reach 45 million in 2030, 4.5 times that of 2022. It can be seen that the electric vehicle industry is in the ascendant, the market potential is huge and has yet to be activated, and some people in the West hype the so-called "overcapacity" in China, the real purpose is nothing more than to suppress the development of China's emerging industries.

Since there are still many regions and countries that welcome China with a smile and provide a good business environment, it is indeed a question whether our companies want to stay in the European market and compete for this meager profit.

It seems to be somewhat clear what the U.S. government is thinking: even if European car factories are increasingly reluctant to produce Ford, Chevrolet and Chrysler, even if Europeans can no longer fall in love with gas-guzzling cars like pickup trucks and three-row SUVs, and if European factories cannot be allowed to produce small Chinese electric cars.

Well, in the 80s of the last century, they also used tariffs and sanctions to exclude Japanese-made cars, and today they are suffering from "autophobia" again. However, they didn't seem to be able to stop the rise of Japanese cars back then.

Privy Council No. 10 / Yan Yanxia

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