Rhodium Group forecasts high tariffs of 55% needed to curb Chinese electric vehicle imports into the EU due to cost advantages and price competition

Rhodium Group, a research firm, predicts that higher tariffs of up to 55% may be necessary for the European Union (EU) to curb imports of electric vehicles (EVs) from China. This estimate surpasses earlier predictions made by Rhodium Group, which anticipated levies between 15% and 30%. The EU’s anti-subsidy investigation into EV exports from China is currently underway. According to the report released on Monday, tariffs in the range of 15% to 30% are unlikely to be sufficient for deterring competition from Chinese manufacturers due to their substantial cost advantages over Western counterparts. The research suggests that even with duties at the higher end of this scale, some China-based producers will still make comfortable profit margins on cars exported to Europe because they enjoy significant cost benefits in comparison to domestic markets where there is a price war between EV makers such as BYD which toppled Tesla last year. The report also highlights that Chinese companies can sell vehicles at much higher rates and profit margins in regions like the EU compared with their home market, despite paying 10% tariff rate on exports to Europe. Rhodium Group estimates that a company like BYD will make an estimated profit of €14,300 per car sold in Europe versus just €1,300 earned from selling cars domestically at the Seal U model’s price tag of 20,500 euros in China and $42,000 ($USD) euro area list price. ByD’s CEO expects market share for BYD-produced electric vehicles to reach around 1% this year before rising above the 3% mark by 2026; it could then surpass Tesla’s EU market shares, which reached just under a third last year after almost doubling its shipments into Europe from China. The European Commission launched an investigation in October over Chinese EV subsidies and imports due to concerns that cheap vehicles were threatening domestic producers. According to some experts, incentives implemented by the Chinese government in early 2010 led to significant battery cell capacity increases, making globally competitive electric cars affordable for manufacturers like BYD who are pursuing global expansion strategies outside of China where they face resistance from US tariffs and political opposition due to their EVs being seen as a national security risk. Rhodium Group also warns that if the EU applies duties at 15%-30%, it could wipe out business for foreign manufacturers like BMW or Tesla who ship cars from China, which may result in them moving production back to Europe instead of sourcing EV components and assembling vehicles locally. The Chinese government has criticised Brussels’ investigation into subsidies on the grounds that its companies are simply more competitive than their Western counterparts due to lower costs resulting from economies of scale rather than unfair advantages gained through state-sponsored initiatives. Rhodium Group suggests alternative measures such as limiting imports under national security arguments, raising consumer subsidy programmes for electric cars produced locally or setting higher environmental standards in the EU which Chinese EV makers will struggle meeting since many components originate from polluting coal mines located upstream in China’s supply chain network.