EU tariffs on China EVs could hurt both sides

The European Union announced on Wednesday June 12 that it will impose additional tariffs of up to 38.1% on electric vehicles (EVs) imported from China from July 4

The move is expected to not only hurt EV makers in China, but also lead to increased competition for automakers in Europe, given that Chinese EV makers might invest in European production to avoid tariffs, sources told Fastmarkets.

Tariffs will differ based on the level of cooperation with the investigation of subsidies launched in 2023, the EU said.

Automakers including BYD, Geely and SAIC were notified of the tariff hikes following an anti-subsidy investigation into Chinese EVs in October 2023, the EU said.

Duties for SAIC Group, on top of an existing 10%, will climb by 38.1%. BYD will face a 17.4% tariff increase, while Geely will see tariffs on its EV exports to the EU increase by 20%, according to the announcement.

SAIC has the highest number of exports to Europe among Chinese automakers. The company exported a total of 1.2 million vehicles in 2023, up by 18.75% from 2022 and of which, more than 200,000 units were exported to Europe, according to SAIC Group’s annual report.

Europe has surpassed other regions in the world for volumes of imported EVs made in China, which is a trend that has made it increasingly competitive for its domestic auto makers, sources told Fastmarkets.

Europe’s imports of EVs from China started began surging in 2021. Out of the 1.203 million units of new energy vehicles exported from China in 2023, 38% were shipped to Europe, according to data from the China Passenger Car Association (CPAC).

The latest move by the EU is expected to reduce China’s EV exports into Europe and place further pressure on Chinese automakers given that the United States had announced in May a 100% border tax on electric cars from China, according to an industry analyst.

Tariff hikes could be a double-edged sword: sources

“European automakers also face a potential risk given that Chinese automakers might cope with the hike in tariffs by adding manufacturing power in Europe,” the same industry analyst said.

Chinese EV makers are starting to set up production in Europe, with BYD announcing in December the construction of a plant in Hungary, while Chery has entered into joint venture with its Spanish partner Ebro to produce 50,000 units in 2027 and 150,000 units in 2029 at their new plant in Barcelona.

“Though Europe’s new move poses new challenge, we remain optimistic about the global markets especially in Southeast Asia and South America where there still is a lot of potential,” an EV producer in China said.

EV sales in China

The sales of new energy vehicles (NEV) in China totaled 790,000 units in May, up by 36% compared with the same period in 2023. Cumulative sales came in at 3.24 million units in the first five months of 2024, up by 34% year on year, according to data from CPAC.

BYD also hit a high of 331,800 units in NEV sales in May, up by 38% year on year, according to its company report.

Lithium carbonate prices under pressure

“The added duties on China’s EVs might limit lithium demand and slow EU’s green energy transition due to the drop in affordable EVs coming from China,” a producer based in Xiamen said.

Fastmarkets’ price assessment for lithium carbonate 99.5% Li2CO3 min, battery grade, spot price range exw domestic China was 98,000-101,500 yuan per tonne on June 4, down by 5.09% from 104,000-106,200 yuan per tonne on May 30.

The dip was largely due to expectations of reduced demand from the EV sector, amid a slowdown in procurement activities in both the nickel cobalt manganese and lithium ferro phosphate cathode active material, which has resulted in low liquidity, sources said.

China’s domestic supplies also continued to climb on the back of higher output from brine producers, with one of the largest lithium producers in China resuming production in the previous week, following a three-week pause in production after the Labor Day holiday period from May 1.

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