EU targets Chinese electric vehicles ahead of Xi Jinping visit

Semafor signals

Insights from the Central European Institute of Asian Studies, the Royal United Services Institute and the Rhodium Group

The news

The EU is “advancing” its investigation into Chinese electric vehicles as the bloc aims to reduce China’s green technology overcapacity ahead of Xi Jinping’s visit to Europe next week, EU trade chief Valdis Dombrovskis told Politico.

Dombrovskis suggested Brussels could impose tariffs on Chinese EVs “before the summer holidays” as European companies struggle to compete with Chinese products. Such actions seem more likely after the European Commission warned Chinese electric vehicle makers BYD, SAIC and Geely that they had supplied insufficient data in the anti-subsidy investigation, Reuters reported.

European lawmakers still hope they can convince Xi to scale back his protectionist economic model to allow for more equitable competition in green technology. But China’s friendly countries, notably Hungary — which plays a significant role in Europe’s own EV production — are making it harder for Brussels to combat Chinese competition. Tariffs may also do little to slow Chinese imports, some analysts believe.

SIGNALS

Sales of EVs made in China fall in France

Source: Reuters

Rather than wait for the EU to impose tariffs on Chinese EVs, France last year excluded Chinese-made EVs from its cash bonus scheme, where new buyers can get subsidies of up to $7,500 for certain EV models. In four months, the scheme has already had a considerable impact: Tesla’s Model 3, Dacia Spring and SAIC MG4 EVs — all assembled in China — had a 22% market share in the months before the scheme was implemented. This share fell to just 4% in April, according to a Reuters analysis, which France took as a sign that such measures could help boost sales of European-made cars.

The EU cannot alienate China-friendly Hungary

Sources: Royal United Services Institute, Central European Institute of Asian Studies, European Council on Foreign Relations

Hungary is embracing Chinese investment – ​​Beijing became its biggest investor in 2023 – and has become a hub for Chinese production of electric vehicle parts. Despite growing economic ties with China, the EU cannot risk alienating Budapest given its crucial role in the supply chain of European car manufacturers, as companies such as Mercedes-Benz and BMW open new factories in the country, says Chinese analyst Sari Arho Havrén, from the Royal United Services Institute. , a security think tank, told Semafor. But “it is clear that China has an advantage” in Hungarian investment, and Europe will have difficulty keeping up with the financial demands of Hungary, which is in financial difficulties, according to Chinese analyst Sebestyén Hompot of the Central European Institute of Asian Studies. This is ringing alarm bells in Brussels, where lawmakers have learned the hard way not to rely on adversaries like Russia for energy.

The story continues

Tariffs unlikely to stop Chinese EV makers from selling in Europe

Source: Rhodium Group

Chinese electric vehicle manufacturers are making huge profits selling in Europe as China’s electric vehicle price war has driven down prices significantly. BYD’s Seal U model provides the company with a profit of about $15,000 in the EU for each sale, compared to just $1,400 when sold in China, according to an analysis by Rhodium Group. The EU is considering a 30% tax on EV imports, but that number would still leave BYD with a 15% EU premium compared to China’s profits, according to Rhodium’s calculations. Just a 40% to 50% tariff could affect BYD’s profits, but that number is unrealistic due to World Trade Organization rules that the EU must comply with.