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A European Union investigation regarding anti-competitive practices in the manufacture of China’s battery-powered vehicles has resulted in additional tariffs of up to 38.1% per car. That will be added to the pre-existing 10% duty on autos exported to the bloc. China became the top auto exporting nation in the world last year and their increasingly large share of the European EV market is likely to be a lucrative revenue generator for the wide array of automakers in the country. Tariffs may do little to stop the Chinese EV advance on the continent, as many of the manufacturers are already setting up shop within the EU’s borders, acquiring plants and partnering with western auto brands to share space on European factory floors. 

Moreover, the new tariffs are only steep enough to push some Chinese EVs toward the very bottom of the average price range for the region. Moreover, their profit margin on vehicles sold within the EU will likely remain multiples of what they earn per unit sold in China. Some European auto executives have expressed more concern about retaliation from Beijing hurting their Asian sales than competition from overseas EVs.

Related ETF & Stocks: KraneShares Electric Vehicles and Future Mobility Index ETF (KARS), BYD Company Limited (1211.HK), SAIC Motor Corporation Limited (600104.SS), Geely Automobile Holdings Limited (0175.HK), Mercedes-Benz Group AG (MBG.DE)

Deliveries of battery-powered cars within China represent about 60% of the global total, and the country is also a dominant player in overseas shipments of local new energy vehicles (NEV) brands as well. Europe was the destination for about half of the NEVs China exported last year – a categorization which covers both hybrid and fully-electric vehicles (EVs). Low prices relative to international competitors have made China’s wide array of EV brands particularly attractive, even in light of a 10% EU tariff on China-manufactured vehicles imported into the bloc. However, a new set of tariffs on several popular Chinese electric vehicle brands were rolled out by EU officials this morning, targeting BYD, Geely, and SAIC. Those vehicle makes will now face additional tariffs of 17.4%, 20.0%, and 38.1%, respectively, meant to offset the cost-cutting impacts of heavy state subsidies handed down by Beijing that are considered anti-competitive in European markets.

More general trade restrictions were placed on other automakers producing electric vehicles in China, including European companies with factories or joint ventures there, who now face a tariff of either 21.0% or 38.1%, depending on whether or not they cooperated with EU’s investigation. The new set of tariffs are set to apply by July 4, with the anti-subsidy investigation set to continue until November 2, when definitive duties covering a period of years will likely be applied. Further, a decision will be made on whether duties might be collected retroactively from March – when the EU began registering all imports of all Chinese EVs.

Tariffs have been viewed by some as a disastrous prospect for Chinese auto exports, as the country was expected to ship 6.0 million vehicles abroad in 2024, up 22% YoY versus last year’s 4.91 million units, according to officials from the China Chamber of Commerce for Import and Export of Machinery and Electronic Products. China became the top vehicle exporting nation in the world last year, surpassing Japan, and their advances in…

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