The European car industry is nervous to see the scale of the reaction to the EU’s interim resolution to impose tariff sanctions on Chinese electric vehicles, alleging illegal subsidies.
Unfortunately for Europe, retaliation would arguably not be limited to automakers.
At first the questions were simple. What are the implications of the European Union’s tariff attack on Chinese imports of electric cars? Will this continue on a scale comparable to that proposed across the EU? If so, how many new factories will be built in Europe or what types of joint ventures? Can we hope to produce the electric cars that Europeans want to meet EU CO2 mandates until 2035?
German automakers such as BMW, Mercedes, Volkswagen, and Porsche were seen as the most likely victims of Chinese retaliation, as their massive imports of expensive, high-end cars were simple targets. Stock costs plummeted.
Since then, the scope of imaginable retaliation has expanded to affect other sectors with much more serious implications for EU trade.
Reuters’ BreakingViews column explains it this way.
“The European Union is getting more than it expected. Following the bloc’s resolution last week to impose price lists on imports of electric vehicles made in China, Beijing opened an anti-dumping investigation into imported red meat and its byproducts. It’s a wise move in Beijing,” said BreakingViews columnist Hudson Lockett.
After the initial announcement, Germany came out clearly in favor of lax industry and opposed the expansion of tariffs, obviously backed by the wishes of its major automakers. France, with less investment in China’s auto industry, settled for the proposed tariffs, which proposed a tariff increase of up to 38. 1% for SAIC and its MG brand, BYD of 17% and Geely of 20%, in addition to the base rate of 10%.
But China has reportedly hinted that it will broaden the scope of its imaginable retaliation to include major European manufacturers such as French wine, cognac and agricultural products, Toulouse, France-based Airbus Industrie, and now red meat exports, governed through Spain and the Netherlands. , Denmark and France, according to BreakingViews.
China for the first time denounced the planned price lists as “blatant protectionism” without a “factual and legal basis. ” Later reports from China warned that a softer reaction could simply lead to compromises, but this discussion of extending the Chinese reaction to other EU industries suggests a relentless attempt to force the EU to give in.
“No one is at war with China,” said Volker Wissing, transport minister in the German government’s liberal democratic coalition, according to Automotive News Europe.
“It would be a crisis for Germany and it would not be a crisis for the European Union either,” Wissing said.
In a report, Fitch Ratings found that while the overall increases looked concerning for China, they would not materially affect the competitive landscape anytime soon. He noted that the electric vehicle market in Europe underperformed expectations.
Concept of trade, industry between China and the EU, cooperation and competition
“However, if China retaliates, adding broader measures covering other vehicles, or even other business sectors, German automakers would be most affected,” Fisk Ratings said in the report.
“The effect of possible broader measures would affect the margins and the generation of money flow of German car manufacturers. However, we expect its existing wiggle room to help absorb those pressures without affecting its ratings,” Fitch Ratings said.
The long-term implications are less clear, he says.
Fitch said German automakers’ exports to China accounted for 10% of their sales, basically high-margin luxury models. Any new fees (an additional 25% have been mentioned) would likely be absorbed through customers.
Even if Chinese costs were to rise sharply in Europe, those sales would be more successful than those in the highly competitive domestic market. Beyond 2025 and 2026, European automakers will likely have “affordable” mass-market EV models, such as the festival will most likely intensify, Fitch said.
Rhodium Group had said that with tariff grades below 50%, Chinese electric cars would continue to be successful due to their more efficient manufacturing. Investment bank UBS said this gave companies like BYD a 30% loading advantage.
EV sales in Europe have stalled at around 2 million a year after the initial, likely unstoppable, momentum stalled. Sales will have to increase temporarily if they want to reach nine million by 2030. Even at this point they would fall behind the EU and the United Kingdom. The goal is for EV sales to account for around 80% of total vehicle sales by 2030 and 100 percent by 2035.
Last year, Allianz Trade said electric cars made in China could cost European manufacturers 7 billion euros ($7. 7 billion) a year in lost profits until 2030 unless the EU takes steps to raise tariffs. , give life to batteries and other technologies, or convince China to manufacture cars in Europe. Training
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