Die Kehrseite der Zölle: Europas Elektroauto-Industrie im Wettbewerbsdilemma

The implications of increased tariffs on Chinese electric vehicles

Currently, there's a significant price gap between electric vehicles manufactured in China and those sold domestically. The European Union's latest move to impose tariffs on electric vehicles imported from China may signal the start of a new trade conflict that could potentially harm Europe in the long run.

According to a document exceeding 200 pages from the European Commission, there is substantial proof that the Chinese government is providing active subsidies to its battery electric vehicle (BEV) industry to expedite its worldwide growth.

Europe has determined that such practices are inequitable and have immediate detrimental effects on the domestic industry. The availability of low-interest loans and a host of other financial solutions supported by the Chinese government has enabled firms such as BYD, SAIC (MG), and the Geely Group (owners of Volvo, Polestar, and Lotus) to market their electric vehicles at highly competitive prices.

According to a formal report, the European Union is claiming that there's a significant rise in imports, sales, and approvals of Chinese battery electric vehicles (BEVs), which is impacting European manufacturers negatively. The EU primarily blames these subsidies for the sluggish sales growth of European-made BEVs. However, there are a couple of critical points that the document fails to address, which, in our view, should be discussed.

Europe's Struggle with Competitive Edge in the Automotive Sector

The significantly low prices of Chinese electric vehicles could pose a threat to the European car industry while also highlighting its current lack of competitiveness. Imposing tariffs can offer a temporary respite, giving European manufacturers additional time to develop more competitive electric vehicles. However, this does not address the fundamental issue of their insufficient competitiveness in the market.

High wages, limited availability of raw materials for battery production, and escalating regulatory red tape are creating significant barriers for European manufacturers to provide truly affordable electric vehicles. In fact, a substantial portion of electric vehicle sales in Europe can be attributed to monetary incentives rather than an inherent appeal over traditional combustion engine cars.

In Germany, the most affordable electric vehicle on the market is the Dacia Spring 27 kWh Essential, which boasts 45 horsepower and can travel 225 kilometers on a single charge. Its retail price is 16,900 EUR without any subsidies. However, for those seeking the least expensive combustion engine car, the larger Dacia Sandero 1.0 SCE 65 Essential is available. It comes with a 67 horsepower gasoline engine and costs 11,500 EUR, freeing the owner from concerns about driving range and charging stations.

If you're in the market for something more substantial, you have the option to purchase an Opel Corsa 50 kWh electric vehicle offering 136 horsepower at a cost of €34,650. At this price point, you can also acquire the Peugeot 2008 GT 1.2 petrol B-SUV, which boasts 131 horsepower. It's important to note that numerous customers require additional incentives beyond the savings on fuel to make the switch to an electric car.

Greater Profits Than Ever Before

The secondary reason is closely tied to the initial one. To date, all conventional car manufacturers have shifted their focus toward manufacturing fewer vehicles, yet selling them at increased prices. This strategy was adopted during the pandemic and supply chain crisis from 2020 to 2022, and since then, it has become an addictive practice for them.

Auto manufacturers in Europe and the U.S. effortlessly boosted their profits by charging more and extending the delivery times for new vehicles… until they faced competition from Chinese rivals.

To the dismay of consumers, established car manufacturers have leveraged their dominant market positions to maintain high prices, increasingly out of reach for many who cannot afford a new vehicle. For instance, Volkswagen Group's operational margin rose from 6.7% in 2019 to 7.0% in 2023, even as the number of vehicles delivered dropped by 16% during the same period. Despite fewer units being sold, the company's sales revenue surged by 28%, indicating a significant hike in car prices.

This trend was observed across European and American car manufacturers. It worked in their favor (not the consumers') as long as they operated solely within their domestic markets. However, when China started exporting its vehicles at competitive prices (China's approach has been volume-driven rather than margin-driven thus far), these offerings became the go-to option for numerous first-time car buyers globally.

Another intriguing instance is the significant cost disparity for a car produced in China when it's sold locally compared to its price tag in Europe. What could possibly justify the same model, with nearly identical specifications and features, coming out of the same factory, having such varied pricing depending on the market?

Import tariffs might shed light on some of the price discrepancy, yet they don't account for the entire gap. The BMW iX3 produced in China, equipped with an 80-kWh battery and delivering 210 kW, starts at a price of 51,500 Euros in China (based on the current exchange rate). The identical model is priced at 74,200 Euros in Germany.

The issue at hand is that regulatory authorities are targeting new competitors with reasonable pricing instead of combating the price surge from established car manufacturers. While it's essential to safeguard local industries, this shouldn't result in making the limited number of competitive products more expensive. Instead, the focus should be on streamlining regulations, reducing bureaucracy, and enhancing investment conditions across Europe.

Additional insider information:

All pricing information is sourced from JATO Dynamics.

Felipe Munoz, who penned the article, holds expertise in the automotive sector and is associated with JATODynamics.

Most Read

LATEST ARTICLES

LATEST ARTICLES

Regarding this Article