Europe could have to impose tariffs of as much as 55%

To curb this, the European Union could have to impose higher-than-expected tariffs of as much as 55% on Chinese electric vehicles their imports into the bloc, accordingly a brand new evaluation from Rhodium Group.

The findings, published on Monday, come as a part of the EU's ongoing anti-subsidy investigation into electric vehicle imports from China.

Rhodium Group, which expects the EU to impose tariffs within the range of 15% to 30% on Chinese electric vehicles, said those tariffs would likely not be enough to curb competition from China.

“Even if tariffs are at the higher end of this range, some China-based manufacturers will still be able to achieve comfortable profit margins on the cars they export to Europe due to the significant cost advantages they enjoy,” says the report.

However, Chinese firms equivalent to BYD, which displaced Tesla because the world's largest electric vehicle maker last yr, can sell cars at much higher prices and with much higher profit margins in regions equivalent to the EU in comparison with the domestic market pay a tariff rate of 10%. Chinese electric vehicle manufacturers are engaged in an intense price competition of their home market.

BYD's Seal U model, which sells for 20,500 euros in China and 42,000 euros within the EU, generates an estimated profit of 1,300 euros in its home market versus 14,300 euros per automobile in Europe, Rhodium said. Even after 30% tariffs, an organization like BYD will make the next profit within the EU, it said.

The report says BYD will likely have to cut prices to attain its goal of gaining more market share within the EU. A tariff rate of 30% would still leave enough scope for this.

“Much higher tariffs of around 45% or even 55% for highly competitive manufacturers such as BYD would likely be necessary to make exports to the European market unattractive for commercial reasons,” the report said.

The European Commission, the EU's executive arm, launched an investigation into Chinese electric vehicles and subsidies last yr. Officials said a flood of low cost vehicles threatened domestic manufacturers.

According to some experts, incentives introduced in China within the early 2010s led to a surge in startups and increased battery cell capability within the country, paving the way in which for globally competitive and reasonably priced electric vehicles.

Chinese electric vehicle makers have already faced U.S. resistance attributable to high tariffs and political opposition, making the European market increasingly vital for firms like BYD looking for global expansion.

Electric vehicles from Chinese firms are expected to account for 11% of the EU market in 2024 and will reach 20% by 2027, in line with an evaluation by the European Federation for Transport and Environment.

If the vehicles manufactured in China by non-Chinese firms are taken under consideration, this figure is anticipated to rise to over 25% this yr.

Imports of electrical vehicles from non-Chinese firms may be subject to the EU subsidy probe, with Rhodium estimating that tariffs of 15% to 30% could kill the business of foreign players equivalent to BMW or Tesla that ship cars from China.

In response to the political risks, electric vehicle manufacturers have worked to maneuver production to Europe. BYD plans to construct a factory in Hungary.

However, Rhodium adds that Brussels could also use other means to guard the European electric vehicle industry, equivalent to restricting Chinese imports on national security grounds or increasing consumer subsidies for EU-made vehicles.

The Chinese government has described the EU subsidy investigation as “blatant protectionism” and argued that its firms are simply more competitive than their Western counterparts.