EU tariffs on Chinese EVs won’t work, experts say
Chinese car-makers have large enough margins to absorb even a 30 per cent import tariff: reportEfforts to artificially limit the number of Chinese-built EVs in the European Union via import tariffs are destined to fail because of the high profit margins built into every car, according to a new report.
Schmidt Automotive Research founder Matthias Schmidt has told industry journal Automotive News that even if European legislators introduce high tariffs of up to 30 per cent, most Chinese car-makers will carry on unaffected without any price rises – such is the profit margin available on even the cheapest models.
“We assume they will be able to soak up the rise in tariffs largely into their high profit margins and the customer won’t notice any difference,” Schmidt said.
“They can’t really command a price premium over incumbent brands … [so even if tariffs increase] they will continue at the same price level and operate on lower profit margins.”
The European Commission is primed to make a decision on whether to impose tariffs on Chinese-built EVs, following an investigation into Chinese government subsidies that are reportedly helping their car-makers undercut European rivals.
Schmidt’s comments have been amplified by the Rhodium Group, a New York-based thinktank that has suggested tariffs would need to be 50 per cent (up from the current 10 per cent) before they begin to make an impact on Chinese brands.
It’s been widely reported that the European Commission is considering a maximum tariff increase of 30 per cent – a rise Rhodium says won’t touch the sides.
“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,” Rhodium said.
More than 300,000 Chinese-built EVs were sold in Europe in 2023 – including many from European brands. Chinese brands alone claimed a 19 per cent market share.
Proponents for tariffs point to brands such as BYD, which sells the Seal U mid-size SUV (known in Australia as the BYD Sealion 6) from the equivalent of €21,769 ($A35,500) in China, while an identical vehicle in Germany apparently costs €41,990 ($A68,300).
Even cheaper models like the BYD Atto 3 small EV sells for the equivalent of €17,923 ($A29,200) in China, compared to €37,990 ($A61,800) in Germany.
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