New EU tariffs pose challenges for Chinese BEV

• EU tariffs of 19% to 46.3% on Chinese Battery Electric Vehicles (BEVs) entering Europe will potentially slow growth of Chinese automotive brands in the region (latest changes in import duties 20 August 2024)
• UK government has yet to announce its stance on these tariffs, leaving uncertainty about how pricing and consumer demand for Chinese BEVs will be affected
• Chinese brands are focused on capturing European market share, with success dependent on brand acceptance, dealer networks, and local manufacturing efforts
   

The recent influx of Chinese automotive brands into the UK and European markets has sparked widespread attention, but with new EU tariffs on Chinese Battery Electric Vehicles (BEVs), what impact will this have on market penetration in the UK? That’s the question asked by Owen Edwards, Head of Downstream Automotive at professional services business Grant Thornton, writing in Cox Automotive’s latest Insight Quarterly. 
 
“Historically, Europe presented an attractive opportunity for Chinese brands due to its large new vehicle market and lower import tariffs,” explains Edwards. “However, the newly proposed tariffs by the EU, aimed specifically at Chinese BEVs, threaten to disrupt these expansion plans. The new tariffs range from 19% to 46.3%, depending on the level of cooperation with the EU's research. These measures are a response to the significant government support that Chinese BEV manufacturers receive, which the EU believes could distort competition and impact the local automotive industry.”
 
With over 30 million new vehicles and 350 million used vehicles sold annually in China, Chinese Original Equipment Manufacturers (OEMs) see the UK and Europe as prime markets for expansion. The UK, being the second-largest new car market in Europe, is poised to be a significant battleground for these brands.
 
Philip Nothard, Cox Automotive’s Insight Director, comments: “The implications for the UK market are yet to be fully realised, as the UK government has not yet clarified its stance on import tariffs for Chinese BEVs. However, the impact on consumer pricing and brand acceptance could be substantial, as identified by Owen and the Grant Thornton team in our latest Insight Quarterly.”
 
One particular area of concern is that the new tariffs only apply to Chinese BEV imports, while traditional ICE vehicles remain at the lower 10% tariff. Edwards notes: “Some Chinese brands, like BYD, have indicated a willingness to absorb the increased costs, while others may pass them on to consumers, potentially slowing their growth in the region.”
 
He continues: “In the short term, we may see a slowdown in sales of some Chinese BEVs due to the new import tariffs. However, the impact will likely be less severe for those brands that can absorb the costs. Notably, Chinese OEMs like BYD are already planning to manufacture in the EU, with battery plants in Hungary and vehicle plants in Turkey on the horizon. Chery also has potential manufacturing support in Spain. By producing locally, these companies could bypass some tariffs, reducing costs and allowing them to compete more effectively in the European market.”
 
Despite these challenges, Chinese brands remain determined to capture market share in Europe. However, Cox Automotive’s Nothard comments: “Factors such as brand acceptance, dealer networks, parts supply, and residual values will play a critical role in their success. We are interested to see how much market share the Chinese brands are able to take, and how quickly, as highlighted in the latest Insight Quarterly by Owen and the Grant Thornton team.”
 
Read Owen Edward’s full article in Cox Automotive’s Insight Quarterly.