The European Union's temporary tariff on Chinese electric vehicles (EVs) kicked in on the 5th, sparking varied reactions among automakers. Despite initial assurances from Chinese manufacturers that their European operations would remain unaffected and prices stable, there are signs of a shift in their stance.
SAIC Motor's MG brand, hit with a hefty 47.6% tax rate for its perceived lack of cooperation during the investigation, is a case in point. A French spokesperson for MG recently revealed that the company has ample inventory in Europe, particularly of the hot-selling MG4, and expects to maintain current prices until November.
Supply chain insiders suggest that subtle pricing signals might stoke consumer anticipation and drive sales, providing a boost for MG. For instance, in Germany—where EV subsidies have been eliminated—MG's June sales outstripped Tesla's, with a year-on-year growth of 96%. Nonetheless, Tesla still leads in cumulative sales for the first half of 2024.
SAIC, the largest Chinese automaker by sales volume in Europe, remains relatively insulated from the tariff's impact. MG's primary European markets, the UK and Norway, are not EU members, leaving their core sales base unaffected.
In response to the EU tariffs, SAIC could pivot to hybrid and fuel vehicles in EU member states. However, for pure EVs, the likelihood of price cuts for promotions in the near term appears slim due to anti-subsidy and tariff complications.
NIO, facing a 30.8% total tax rate, has no plans to adjust its vehicle prices, according to its Italian spokesperson. Meanwhile, BYD and Geely, with lower tax rates of 27.4% and 29.9% respectively, are expected to leverage their cost advantages to absorb the increased tariffs, avoiding immediate market disruption.
Industry observers note that the US Inflation Reduction Act (IRA) of 2023 imposed strict material sourcing regulations, and the 2024 inclusion of "foreign entities of concern" is set to escalate the tax rate on Chinese EVs to 100%. This raises the prospect of Europe following suit, heightening trade barriers against Chinese EVs.
Foreign media reports that the European Commission estimates SAIC received a total subsidy of 34.4%, encompassing 1.38% from state bank loans, 8.27% from various financing sources, 8.56% from grants, 2.28% from EV sales incentives, 0.67% from cheap land, and 13.24% from low-cost batteries. Comparable subsidies for BYD stand at 15.1% and Geely at 19.72%.
Moreover, these companies have benefited from high "AAA" credit ratings from Chinese state rating agencies, enabling lower loan rates but also leading to high debt ratios and using loans for debt repayment. Consequently, their overall financial health is rated "B," with their bonds considered junk bonds by investors.
The European Commission contends that these automakers, unable to maximize profits and acting as government tools, pose significant threats to European car manufacturers. Beijing, meanwhile, has withheld detailed registration data for Chinese EVs by brand, model, and location—a surprising omission from the government's records.
In retaliation, Beijing has threatened countermeasures, arguing that the extensive data demanded by the European Commission involves commercially sensitive information.
