A few days ago, the European Union decided to impose a temporary surcharge of up to 38.1% on China's electric vehicles.
It is not only China that has protested against the EU's tariffs, but also Germany, Hungary and other EU member states. European automakers, especially German automakers, are worried about being "countered by tariffs" by China. According to another survey, Chinese companies' EV sales and investment enthusiasm in Europe have been affected.
Recently, the European Union seems to have adjusted its tariffs on Chinese electric vehicles, intending to reduce the tariffs on SAIC by 0.5% to 37.6%, and Geely Automobile by 0.1%. But judging from the magnitude of the reduction, it feels like it doesn't make much sense.
Coincidentally, Turkey, Brazil and other major destination countries for China's automobile exports have also adjusted their tariff policies.
At a time when China's automobile exports have entered a critical period, the global market competition pattern and changes in the tariff policies of various countries will not only affect the current export sales, but also affect the future overseas market layout strategy.
Based on the measures of the European Union, Turkey and other countries and regions to impose tariffs, Gasgoo has sorted out the tariff situation of the top 15 markets in China's automobile export sales, and has a deep understanding of which country's tariff policy is more friendly and suitable for recent investment. Which markets, while with great potential, still need to be vigilant or give up for the time being.
(Full version at the end of the article)
Tariffs in the top 15 markets of export sales
According to data from Cui Dongshu, secretary general of the passenger association, in the first five months of 2024, China's total automobile exports reached 2.445 million units, a year-on-year increase of 26%, with an average unit price of 19,000 US dollars (about 139,000 yuan). NEV exports totaled 869,000 units, up 29% y/y, with an average unit price of USD 22,000.
The top 15 markets for automobile export sales include Russia, Mexico, Brazil, Belgium, etc. Six of the top 15 countries and regions in terms of new energy export sales include India, Uzbekistan, Germany, South Korea, Israel and Indonesia.
On the whole, the TOP15 market of "overall export volume + new energy export volume" involves a total of 21 countries and regions.
The following is the tariff situation of the main market (the statistics are mainly the export tariffs of the whole vehicle, and because many countries and regions will levy different tariffs according to the vehicle displacement, level, power type, etc., the values will fluctuate and will be quite different, for reference only):
Russia, the mainland's largest export market, exported 375,000 units in the first five months of this year, accounting for 15% of total exports. According to the Ministry of Commerce, Chinese cars exported to Russia are subject to 15%~25% tariffs and 20% value-added tax.
Mexico is China's second-largest market for auto exports, with sales of 192,000 units in the first five months of this year, up 63% year-on-year. Mexico is also the mainland's largest export sales of new energy passenger vehicles, ranking eighth with 29,000 units. Mexico imposes a 15%~20% ordinary duty on automobiles, 16% VAT, and 0.8% Deferred Tax (DTA).
Brazil, the third largest market, saw a significant increase in sales to 160,000 units in the first five months of this year, an increase of 8.5 times year-on-year. Brazil imposes tariffs of around 20% on cars exported from China. At the same time, Brazil is the largest market for new energy exports in mainland China, with sales reaching 131,000 units in the same period this year. Currently, Brazil imposes a tariff of 10%~15% on electric vehicles (rising to 18%~25% from July). The adjustment of tariffs is a key reason for the sharp increase in sales of Chinese automobiles, especially electric vehicles, to Brazil in the second quarter.
In the Middle East, Saudi Arabia and the United Arab Emirates are also the main markets for mainland automotive exports. Tariffs on automobiles in both countries are quite low, at just 5%.
Among ASEAN countries, thanks to the China-ASEAN Comprehensive Economic Cooperation Framework Agreement, Malaysia, Thailand, the Philippines, Indonesia and other ASEAN countries on the list provide preferential tariffs on Chinese automobiles.
Among them, the Philippines only imposes a tariff of 0%~5%. Thailand, on the other hand, exempts Chinese electric vehicles from tariffs and imposes tariffs of up to 50% on gasoline vehicles. However, when Europe and the United States enter the Thai market, electric vehicles need to pay a tax rate of 40%~60%, and gasoline vehicles need to pay a tariff of up to 80%.
Australia is the eighth largest market for mainland auto exports, with sales of 82,000 units in the first five months of this year, of which new energy accounts for nearly half of the total. Due to the signing of a free trade agreement with China, Chinese cars exported to Australia enjoy a minimum of 0% tariff preferences.
The European market is the main destination for China's new energy vehicle exports. Among them, Belgium is the second largest market for the export of new energy passenger vehicles in the mainland, with cumulative sales of 115,000 units in the first five months of this year. At present, European countries generally impose a 10% tariff on Chinese cars.
It is worth noting that India imposes tariffs of up to 60%~125% on imported cars, as well as 28% VAT, 22% GST compensation tax, and 10% social welfare surcharge. Among the markets, India has the highest tariffs.
Overall, most countries and regions have tariffs of 25% or less on automobiles, and only a few exceed 25%. However, the recent tariff adjustments in a number of major markets will have a significant impact on China's auto exports.
Several countries have adjusted their tariff policies
Since 2024, policy changes in countries and regions such as Russia, Brazil, Turkey, the United States and the European Union have been particularly eye-catching. In particular, the tariff policy in the latter three markets is clearly aimed at Chinese electric vehicles.
In April this year, Russia introduced a new tariff policy that requires additional scrap taxes when importing cars from Eurasian Economic Union countries, including Russia, Armenia, Belarus, Kazakhstan, Kyrgyzstan and other countries. The tax amount is 306,000 rubles (about 24,000 yuan) to 1.235 million rubles (about 96,000 yuan). Electric vehicles also need to pay an additional scrap tax of 360,000 rubles (about 28,000 yuan).
Taking Geely Monjaro as an example, after the implementation of the new policy, the cost of imports will increase by at least 500,000 rubles, which is equivalent to an increase of about 10% in import costs.
The Russian side said that the move is aimed at achieving fair taxation, and "after that, there will be no difference in the taxes and fees paid whether it is imported from the countries of the Eurasian Economic Union or from other countries." ”
But this policy cut off the route for China to export cars to Russia through the countries of Central Asia. Prior to the implementation of the policy, China's car exports to Kyrgyzstan and other Eurasian Economic Union member states surged. From last year to April this year, the sales of Chinese cars exported to Kyrgyzstan increased by more than eight times.
In order to stimulate car companies to produce electric vehicles in Brazil and revitalize the local auto industry, Brazil resumed the collection of import tariffs on new energy vehicles from January this year. For pure electric vehicles, plug-in hybrid vehicles, and gasoline-electric hybrid vehicles, Brazil's import tariffs will be raised to 10%, 12%, and 15%, respectively, and will be gradually increased to 35% until July 2026.
The United States, the European Union, Turkey and Canada have taken more targeted measures against Chinese car exports.
Among them, the United States announced in May that it would significantly increase tariffs on Chinese imports of electric vehicles, batteries and semiconductors. Among them, the tariff on electric vehicles has been increased to more than 100%, and the tariff on semiconductors has been increased to 50%. Some of the policies will take effect on August 1 this year. Interact Analysis, a global authoritative research organization, believes that since more than half of the lithium-ion batteries in the United States are imported into China, the tariffs will hinder the sales of electric vehicles in the United States.
Turkey followed suit by announcing a 40 percent tariff on all car imports from China, claiming the move was aimed at protecting the domestic auto industry and increasing exports, while also taking into account the current account deficit target and efforts to encourage domestic investment and production.
In the same month, the European Commission proposed to impose a temporary countervailing duty of 17.4%~38.1% on Chinese imports of electric vehicles from July 4 (the current tariffs on SAIC and Geely have been reduced by 0.1%~0.5%).
This decision has not only aroused strong dissatisfaction in China's political and business circles, but also met with opposition from some European car companies and member states. For example, the German Chamber of Commerce said that the imposition of tariffs on Chinese electric vehicles would not protect local companies in the EU. Hungary, for its part, said protectionism was not the solution.
Recently, there has also been news that Canada is preparing to impose new tariffs on Chinese-made electric vehicles, which seems to be intentionally in line with the actions of the United States and the European Union.
These tariff adjustments will undoubtedly have a profound impact on China's auto exports, especially in the field of electric vehicles.
Which market can be boldly entered?
With the change of tariff policies in major markets, Chinese automakers are actually strategically adjusting their overseas layout.
From the perspective of tariffs, for countries and regions with extremely high tax rates, unfriendly attitudes towards Chinese automakers, or limited market size, Chinese automakers can consider temporarily giving up or withdrawing, or choose to adopt an asset-light model, or export through the CKD model and authorize local dealers to operate, so as to avoid the situation of "losing their wives and losing their soldiers".
In India, for example, despite being the world's third-largest consumer of automobiles, Chinese automakers need to be cautious due to its high tariff barriers and unfriendly attitude towards Chinese investors (BYD's application to build a joint venture in the country was rejected). In terms of sales, China's sales to India in the first five months of this year were only 30,000 units, accounting for a small proportion.
Although the U.S. market has huge potential and strong consumer purchasing power, it is also unfriendly to Chinese automakers, and the investment risk is high. The Canadian market is facing a similar situation, and with the low sales of Chinese car exports to the country, there is little point in expanding investment in the country.
However, countries like the European Union and Turkey that impose tariffs on China, given their market potential and geographical location, as well as their friendly attitude towards Chinese investment (both of which support the real estate sales model), may not affect the plans of Chinese automakers to build factories in the country. By localizing production, high import duties can be circumvented.
Turkey is worth paying attention to, as its strategic location makes it an ideal springboard to Europe, Africa and even the Middle East. According to Turkey's Minister of Industry and Technology in June, it is in talks with Chinese car companies such as BYD, Chery, SAIC and Great Wall on the construction of factories.
Image source: SAIC International SMIL
In the European market, Chinese automakers can also choose to set up factories in China-friendly EU member states (all member states are exempt from auto tariffs), such as Hungary and Germany. Due to its friendly China policy and strong automobile industry base, Hungary has become the location of many Chinese car companies such as BYD, CATL, and NIO to build factories in Europe. According to the data, up to now, Chinese companies have invested more than 20 billion euros in the Hungarian automotive industry.
For the Russian market, despite the unique advantages of China's auto exports, the challenges posed by the new scrap tax policy and financial sanctions need to be carefully addressed. Mexico serves as a springboard to the U.S. market, and its investment strategy also needs to be adjusted according to U.S. tariff policy.
At present, the investment markets that Chinese automakers can focus on include ASEAN member states (Thailand, Malaysia, Indonesia), Australia, South America and the Middle East. These regions either have free trade agreements with China or are open to Chinese companies, and have great potential for development.
China and many ASEAN countries have signed free trade agreements. At present, some auto parts, motorcycles and other Chinese goods have been implemented zero tariff, and the market is being further liberalized, and other products will also be gradually reduced to zero tariff during a certain transition period.
In the South American market, Brazil and Chile can focus on the layout. Although Brazil has increased tariffs on electric vehicles, its size and potential as South America's largest economy and automotive market are still huge. Chile has signed a free trade agreement with China, and mainland auto exports enjoy 0% tariff preferences. In addition, Chile is the third largest automotive market in South America, and it also has a high investment value.
The Middle East is also an attractive investment destination due to its low tariffs and strong consumer purchasing power.
In general, the globalization strategy of Chinese automakers should first gain a foothold in a few countries and regions with friendly relations with China and high market potential, and then gradually expand to other major markets such as Europe and Mexico. In this process, companies do not need to pursue everything, but should focus on dominating two or three important markets to remain invincible in the global competition.
Annex: