In brief
- After the EU imposed 38% tariffs on Chinese EVs a day earlier, their shares rose on Thursday.
- “The move is modest compared with the stiff 100% tariffs on Chinese EV imports into the U.S., hiked from 25% last month,” Morningstar equity analyst Vincent Sun stated on Wednesday.
- Joseph Webster, senior fellow at the Atlantic Council’s Global Energy Centre, said the EU “seems to be warning” SAIC to expand manufacturing operations in Europe.
Chinese electric car makers’ shares jumped on Thursday after the EU proposed 38% higher tariffs on Chinese EVs the day before.
BYD, the Hang Seng Index’s top gainer, rose 8% in the morning but sank 6% in the afternoon. Geely’s share price jumped almost 4%, while Nio and Li Auto’s rose 1.5%. Late afternoon trade saw state-owned SAIC fall 1.5%.
Citi analysts called the EU’s new tariffs “generally benign,” while one Morningstar analyst called them “modest” compared to the US’s changes on Chinese electric vehicles last month.
The EU announced on Wednesday that it would charge Chinese electric vehicle companies that do well in Europe more. The extra tax for Geely is 20% and for BYD is 17.4%. SAIC must pay 38.1% higher taxes than the other three. This adds to the 10% tariff on imported EVs.
The ongoing EU investigation sampled all three companies.
The panel ordered Chinese EV businesses that participated with the probe but weren’t tested to pay 21% more in tariffs and those that didn’t to pay 38.1% more.
The EU “provisionally concluded” that Chinese automakers receive “unfair subsidies,” putting its auto industry at “threat of economic injury.”
In a Wednesday report, Morningstar equity analyst Vincent Sun stated, “The move is tiny compared to the Joe Biden administration’s 100% tariffs on Chinese EV imports, which were upped from 25% last month. The 25% provisional duties match market predictions of 20%–25%.”
Citi analysts said Thursday that the tax hike is “generally benign,” less than the 25% to 30% they expected. Citi says, “The harsh tariffs could hurt the EV industry, but they wouldn’t stop China’s recovery.”
The EU probe in October prompted the extra duties. The commission stated in a statement that the penalties will be implemented on July 4 if talks with Chinese authorities fail. The bloc said definitive measures will be taken within four months of preliminary duties.
China criticised interim duties on Wednesday as “blatant protectionism that will create and escalate trade frictions.” Beijing was “deeply concerned and strongly dissatisfied” since it “disrupts and distorts” the global EV market, according to a Ministry of Commerce spokesperson.
Expanding in Eu
According to Atlantic Council Global Energy Centre senior researcher Joseph Webster, the EU “seems to be warning” Chinese state-backed SAIC to develop a production plant in Europe or face penalties.
China’s SAIC group had the highest tariff rate of 38.1%. Webster reported on Wednesday that the manufacturer has failed to choose a site for its first European production facility after nearly a year of consideration.
“Both BYD and Geely have substantial investments in Europe,” Webster said.
After launching an electric bus plant in Hungary, BYD announced a second EV plant in December. Volvo, owned by Geely, is moving some production from China to Belgium.
Nomura analysts said Thursday that China’s OEMs may find local manufacturing “the ultimate solution” in the long term, adding that they are expanding overseas “in order to better fit into the global auto market.”
Watching China
Analysts expect Beijing to retaliate next. China “looks set to retaliate but not escalate,” Citi added, as “benign” tariffs could cause “contained retaliation.”
Albright Stonebridge Group partner for China and technology policy lead Paul Triolo stated, “The key here will be how China reacts to this, and then how the EU reacts to some of these requests [from] companies like Tesla to reconsider the tariffs.”
