On July 4th, the EU announced a provisional anti-subsidy tariff on electric vehicles imported from China, with a final decision set for October 30th. On August 20th, the EU released a draft decision regarding the final anti-subsidy tariffs, adjusting the rates for different Chinese electric vehicle manufacturers based on the latest investigation progress.

Notably, as per a report from Commercial Times, the tariff on Tesla’s electric vehicles has been reduced from 20.8% in July to 9%. Tariffs on vehicles from BYD and Geely have also been slightly lowered.

On August 20th, the European Commission disclosed its draft decision on the final anti-subsidy investigation for electric vehicles imported from China, making slight adjustments to the proposed rates.

Tesla saw the most significant reduction, while BYD and Geely received minor cuts. Specifically, BYD’s tariff rate was reduced from 17.4% to 17%, and Geely’s from 19.9% to 19.3%.

Additionally, other companies that the EU deemed cooperative will face a tariff of 21.3%. Chinese automakers and SAIC Motor, which were assessed as not fully cooperating with the investigation, will have their tariffs adjusted from 37.6% to 36.3%.

The European Commission also decided not to retroactively impose the anti-subsidy tariffs, with the final decision expected by October 30th.

The EU maintains the opinion that Chinese electric vehicle production benefits from extensive government subsidies and thus proposes a final tariff of up to 36.3%, slightly lower than the provisional 37.6% tariff imposed on Chinese imports in early July.

In response, the China Chamber of Commerce to the EU expressed concerns, stating that both the development of the European automotive industry and reports from the EU itself show insufficient evidence that Chinese new energy vehicles have caused substantial harm to the EU market.

Source: China Chamber of Commerce

The Chamber criticized the EU’s decision to impose trade measures based on a perceived “threat of injury,” arguing that this approach contradicts WTO principles and is unacceptable to the industry.

The Chamber emphasized that the competitive edge of Chinese-made electric vehicles is not due to subsidies but rather stems from industrial scale, supply chain advantages, and intense market competition.

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Following an eight-month anti-subsidy investigation, the EU announced on June 12th that it will increase the temporary tariff rate on all Chinese electric vehicle companies from the current 10% to as high as 38.1%. According to a report from CNBC, the European Commission warned that if an agreement on automotive production capacity with China cannot be reached, the new tariffs will be implemented around July 4th.

Per the same report, the European Commission has announced the latest tariff rates, imposing additional tariffs on Chinese electric vehicle manufacturers BYD, Geely, and SAIC Group at rates of 17.4%, 20%, and 38.1%, respectively.

Other companies cooperating with the investigation will be subject to a 21% tariff, while non-cooperating companies will face tariffs as high as 38.1%. American automotive giant Tesla’s electric vehicles produced in China will be subject to a separate tariff rate following the investigation.

As per another report from BBC cited by Commercial Times, nearly 50% of the electric vehicles exported from China to the EU are from Western car brands such as Tesla, Volkswagen, and BMW, with Tesla alone accounting for about 40%. In contrast, the annual sales of Chinese electric vehicle brands in Europe are less than 200,000 units, with a market share of less than 8%, mainly represented by BYD, SAIC Group (which owns the European brand MG), and Geely.

Per a report from the Global Times on June 12th, China’s Ministry of Commerce strongly reacted, expressing discontent on the matter. China, reportedly, will closely monitor the EU’s subsequent actions and take all necessary measures to firmly defend the legitimate rights and interests of Chinese enterprises. The China Association of Automobile Manufacturers also expressed deep regret and stated that the decision is absolutely unacceptable.

Although the EU has decided to impose high tariffs on Chinese electric vehicles, there are still differing opinions among various parties. The German government and automotive industry have reacted most strongly, fearing it could ignite a China-EU trade war.

As per a report from Barron’s, German Transport Minister Volker Wissing stated that, “The European Commission’s punitive tariffs hit German companies and their top products. Cars must become cheaper through more competition, open markets and significantly better business conditions in the EU, not through trade war and market isolation.”

Per a report from Reuters, BMW Group Chairman Oliver Zipse stated that the European Commission’s decision to impose tariffs on Chinese electric vehicles is a wrong way to go. Volkswagen expressed that the European Commission’s decision detrimental to the current weak demand for BEV vehicles in Germany and Europe.

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The European Commission initiated an investigation into Chinese electric cars in October last year, targeting BYD, SAIC Group and Geely, with plans to impose provisional tariffs on new electric cars imported from China. According to previous media reports, the plans were originally scheduled to be announced by June 5th. However, as per Reuters citing sources in a latest report, the new date for announcing the imposition of temporary tariffs has been set for June 10th, after the European Parliament election.

The sources cited in the report also mentioned that the delay was due to last-minute technical issues with the documents. As of now, the European Commission has not provided comments on this matter.

Yet, the same report further noted that the European Commission has formally warned the three Chinese electric car companies under anti-subsidy investigation that the data they provided for the investigation was insufficient.

According to trade data from 2023, for every additional 10% tariff imposed by the European Union on top of the existing 10%, Chinese electric car exporters would lose approximately $1 billion.

Reuters reported that past subsidy investigations launched by the European Union on other products imported from China resulted in additional tariffs ranging from approximately 9% to 26% for related companies, while the tariffs on the Chinese electric car companies may possbly fall between this range.

The report also indicated that China may be preparing alternative plans for future negotiations. If enough EU members oppose the temporary tariffs after four months, there might be challenges to the EU’s temporary tariffs, possibly leading to their cancellation.

According to an earlier analysis by Trendforce, with China’s subsidies gradually phasing out and the increasing market penetration of NEVs in the country, the growth rate of China’s NEV market is starting to slow. This, coupled with the growing demand for electric vehicles in overseas markets, is prompting numerous Chinese automotive brands to expand internationally. But they may have to counter various challenges, as countervailing duty investigation being one of them.

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(Photo credit: Pixabay)

China’s penetration rate of new energy vehicles (NEVs) exceeded 40% for the first time in November this year, reaching 40.4% in domestic retail sales, a 4 percentage point increase from the same period last year. Optimistic growth is anticipated by 2024, with wholesale sales of new energy passenger vehicles expected to reach 11 million units.

The China Passenger Car Association (CPCA) released the latest data, forecasting that the total sales of passenger vehicles in China in November 2023 will reach 25.5 million units. With a huge increase of the 3.2 million units exported in 2017, the overall sales of passenger vehicles are set to significantly surpass the wholesale volume of 24.5 million units in 2017, reaching a historic high.

It is evident that NEVs in China are seen as a catalyst for the next wave of economic momentum. According to a report by the BJNews, Cui Dongshu, the Secretary General of CPCA, stated that the Chinese domestic retail penetration rate of new energy passenger vehicles in November was 40.4%, a 4 percentage point increase from the 36% penetration rate of the same period last year.

This marks China’s first-ever monthly penetration rate of new energy passenger vehicles exceeding 40%. As a key driver of growth in the Chinese passenger vehicle market, the retail sales of NEVs in November increased by nearly 40%, reaching 841,000 units with an 8.9% MoM growth.

In the first 11 months of this year, China’s cumulative retail sales of new energy passenger vehicles reached 6.809 million units, a YoY increase of 35.2%. CPCA believes that the growth outlook for the new energy passenger vehicle market in 2024 is relatively optimistic, with wholesale sales expected to reach 11 million units, a net increase of 2.3 million units, a 22% YoY increase, and a penetration rate of 40%.

Chinese brands in the NEV sector are gradually expanding their market influence through multifaceted development in technology and sales strategies. According to CPCA statistics, in November, 18 companies saw wholesale sales exceed 10,000 units, accounting for 88.9% of the total new energy passenger vehicle volume. BYD continued to lead the rankings with a monthly sales volume of about 301,400 units, followed closely by Tesla China with 82,400 units. The export of Chinese brand new energy passenger vehicles also showed significant growth, with A0-class electric vehicles accounting for nearly 60% and becoming the absolute mainstay of exports.

(Image: BYD)

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This year, BYD, a notable figure in the global automotive market, has recently faced a downturn. The extensive price reductions initiated on November 24th have raised concerns, as it is perceived to contradict the company’s earlier commitment to avoid participating in price wars. BYD is now under pressure to intensify its efforts to reach its annual sales target of 3 million vehicles.

According to multiple reports from Chinese media on November 25th, in an attempt to overcome this challenging situation, BYD has been taking frequent actions. Following a wave of promotional activities in early November, on 24th, dealers reportedly implemented large-scale price reductions, expanding cash discounts to various models such as Qin, Han, Tang, and Song, ranging from CNY 3,000 to 10,000.

The discounts on models like Qin PLUS DM-i and Qin PLUS EV are particularly significant, reaching up to CNY 10,000, with the starting price of Qin PLUS DM-i dropping to CNY 89,800.

BYD Chairman Wang Chuanfu emphasized at the end of August that he was confident in achieving the annual sales target of 3 million vehicles and would not engage in intense price wars within the industry.

The recent measures of BYD, involving two price reductions within a month, have sparked discussions. BYD stated on November 25th that this promotion is limited to the month and is not an official price reduction activity. Its purpose is to accelerate the transition from gasoline-powered cars to electric vehicles.

The market is closely watching whether BYD can achieve its annual target. BYD’s official Weibo account stated on November 24th that it took just over three months to go from 5 million to 6 million units of EVs, marking another milestone. Moreover, in October, the sales of new energy vehicles exceeded 300,000 vehicles for the first time, setting a new monthly record.

However, while BYD’s monthly sales continue to grow, the year-to-date sales growth has significantly declined. In the next two months, BYD’s sales still need to climb above the 300,000 mark to achieve the 3 million annual target. Industry insiders suggest that BYD’s recent price reductions may boost its sales target but are also expected to intensify market price competition.

In addition, BYD faces threats from local competitors. Recently, various forces in the Chinese auto market have made significant deployments. The Huawei Luxeed S7 is set to be launched on November 28, and Huawei showcased a video on the 24th demonstrating the autonomous parking function of the Luxeed S7, highlighting its powerful technological capabilities.

Furthermore, Xiaomi’s progress in the car manufacturing sector continues to advance, with its new car expected to debut in the first quarter of 2024. The competition in the Chinese new energy vehicle market is, without a doubt, increasing.

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