Europe’s EV market is skidding, new China tariffs will make it worse

Tiered tariffs

In a widely anticipated move, the European Commission on Wednesday announced it will impose import duties of between 17.4% to 38.1% on electric vehicles made in China effective next month. 

While recent US plans to curtail competition from China are something of a blunt instrument – 102.5% tariffs on all imported cars – the EU has devised a tiered system based on levels of co-operation with the investigation launched in October last year and the sampling of products from automakers building EVs in China. 

Brussels’ countervailing duties to what it calls Beijing’s unfair subsidization of its electrified car industry start at 17.4% on BYD vehicles making their way to Europe, 20% on Geely (owner of the Volvo and Polestar marques) and 21% on a variety of other OEMs including BMW, Nio, Xpeng, Leapmotor, JAC and Tesla. 

Tesla “may receive an individually calculated duty rate” in November when the investigation wraps up, the Commission said without elaborating. A top rate of 38.1% applies to state-owned SAIC, which the bloc’s executive arm said did not co-operate with the probe.  

These tariffs also come on top of a 10% duty already levied on all vehicle exports into the EU.

Wrong way 

The reaction from Europe’s largest automakers – Volkswagen, Stellantis, BMW and Mercedes – were negative across the board with BMW CEO Oliver Zipse calling it “the wrong way to go” and that the duties harm European companies and interests.  

Volkswagen believes the Commission’s move is “detrimental to the current weak demand for BEV vehicles in Germany and Europe” while Stellantis said the additional duties will not deter it from pursuing its strategy, including its deal with Leapmotor. 

In October last year, Stellantis said it will invest $1.6 billion to acquire roughly 20% of the Chinese electric vehicle start-up,  forming a joint venture to manufacture, export and sell the Chinese company’s EVs in Europe and elsewhere – as soon as 2025.   

Made in China 

Nearly 113,000 of the EVs that found buyers in Europe, including the UK and non-EU states, in the first quarter of 2024 came from China.  

Adamas Intelligence data shows that just over 19%, or 7.0 GWh, of the combined battery capacity of EVs sold in Europe in Q1 were made-in-China. That’s down from a 22% share in Q1 2023 when 7.3 GWh of fresh Chinese battery power rolled onto European roads.  

The majority were non-Chinese owned brands, including Dacia, BMW, Honda and Tesla.    

In the 2023 calendar year the combined battery capacity of Chinese-made EVs climbed to 408.9 GWh (or 59% of the global total) and the country exported 49.5 GWh of installed battery power to the rest of the world.

Eurozoning out

Worldwide, the combined EV battery capacity deployed in Q1 of this year, including plug-in (PHEVs) and conventional hybrids (HEVs), increased by a healthy 24% year-over-year to 160.9 GWh.   

At 82.6 GWh, Chinese EV buyers led the pack, rolling 34% more power-hours onto the country’s roads in Q1 2024 than the same period last year. That compares to 23.9 GWh and 11% growth in the US, and an 8% expansion in Europe to 36.4 GWh.  

Germany, until now the world’s third largest EV market, is most responsible for Europe’s current underperformance. The country saw a combined 6.5 GWh of fresh battery power hit autobahns during the first three months of the year.  That’s down more than 8% from last year’s 7.1 GWh.