Chalfi
Gianmarco Migliavacca
China’s potential reaction to European Union tariffs on Chinese-made electric vehicles could particularly hit German automakers.
Tariffs on Chinese automakers have become a hot topic in Europe after the United States imposed tariffs on Chinese automakers last month. Tariffs on electric car and battery imports from China. The EU Commission is expected to announce its own new tariffs on electric car imports from China in the coming days, which could be imposed as early as July after an anti-subsidy investigation launched last October found evidence of unfair Chinese practices.
Chinese EV makers enjoy an average price advantage of 50% over European manufacturers due to their strong cost competitiveness, so we believe that EU tariffs need to be at least 30% to 40% to be effective, and any lower tariffs would be easy for Chinese companies to absorb while still remaining competitive. Making profits in Europe.
But higher EU tariffs could lead to Chinese retaliation against European exports, and on balance, European automakers have more to lose than gain from the trade war, with any Chinese retaliation likely to hit German automakers primarily.
Volkswagen(OTCPK:VWAGY, OTCPK:VWAPY, OTCPK:VLKAF), Mercedes (OTCPK:MBGAF, OTCPK:MBGYY) and BMW (OTCPK:BMWYYAll of Germany’s major automakers have joint ventures in China producing for the local market, but some of their auto division revenues (ranging from about 9% for BMW to 12% for Mercedes and Volkswagen) come from luxury car exports to China and could be at risk if China imposes tariffs.
However, Renault (OTCPK:RNSDF, OTCPK:RNLSY) and Stellantis (StellaGM () is likely to be little affected by China’s retaliation as it has little exposure to China, but it may actually benefit from EU tariffs on Chinese imports into Europe. In our view, China’s retaliation could be a major blow to GM (GM) and Ford (debt(Because most cars for the Chinese market are already produced in China)
Ultimately, a trade war with Chinese automakers will create winners and losers for Western original equipment manufacturers, but it will also hurt European and US consumers by delaying access to cheap electric vehicles, whose affordability relative to traditional internal combustion engine vehicles is a major barrier to EV adoption in both Europe and the US, and will slow the uptake of EVs.
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