Beijing on Thursday slammed EU tariffs on Chinese electric vehicles as protectionist behaviour even as the country's top auto exporter said the duties would not derail its expansion plans for Europe, including making EVs in Spain this year.
The reaction from China and others embroiled in the dispute,
including European and Chinese car makers, points to clear opposition to the EU
decision and an eagerness to de-escalate the situation.
Industry insiders say both Europe and China have reasons for
wanting to strike a deal in the months ahead to avoid the addition of billions
of dollars in new costs for Chinese electric car makers, as the EU process
allows for review.
China said it would take "all necessary measures"
to safeguard its interests after the European Commission announced on Wednesday
it would impose extra duties of up to 38.1% on imported Chinese electric cars
from July.
“We urge the EU to listen carefully to the objective and
rational voices from all walks of life, immediately correct its wrong
practices, stop politicising economic and trade issues, and properly handle
economic and trade frictions through dialogue and consultation,” Chinese
foreign ministry spokesperson Lin Jian said at a regular press briefing.
Even so, Chery Auto, China’s largest automaker by export
volume, appeared undeterred.
Charlie Zhang, vice president of Chery Auto and president of
its European business, said the company plans to start EV production by year
end at its recently acquired factory in Spain, the company’s first
manufacturing site in Europe.
He said that site will help offset the impact of the
tariffs. Rivals BYD and Great Wall Motor are also looking to set up
manufacturing and assembly plants in the region, aiming to blunt financial pain
from the tariffs as they aim to ramp up sales of lower-cost cars to rival their
European competitors and make up for slower sales in China.
ROOM TO FIND SOLUTION
Brussels seemed to have left some room for the two sides to
continue consultations to find a solution, state news agency Xinhua said in a
commentary, adding it hoped “the EU will make some serious reconsideration and
stop going further in the wrong direction.”
Beijing has rejected the EU and U.S. argument that
overcapacity in China’s EV industry has threatened overseas automakers through
subsidised exports. It says tariffs will slow the uptake of electric vehicles,
endanger climate-change goals and raise costs for consumers.
Brussels said it also would combat Chinese subsidies with
additional tariffs ranging from 17.4% for BYD to 38.1% for SAIC, on top of the
standard 10% car duty. That takes the highest overall rate to nearly 50%.
Washington also recently revealed plans to quadruple duties
for Chinese EVs to 100%.
Other carmakers were more muted than Chery.
Geely, which has a majority stake in Sweden’s Volvo Car ,
expressed “great disappointment”, vowing “all necessary measures” to safeguard
its rights.
State-owned SAIC, which counts on joint ventures with
Volkswagen and General Motors to be China’s largest automaker, said it was
deeply concerned by the tariffs.
SAIC has been China’s biggest automaker for nearly two
decades but its sales have come under pressure and it has been working to
reduce headcount, Reuters has reported.
The EU has made clear that European regulators would view
loans from Chinese state-owned banks and government ownership as subsidies
subject to additional tariffs.
In a sign China has little intention of dialling back
support, the government of the city of Shenzhen on Thursday announced measures
to encourage integration of new vehicles with the electric grid, including
subsidies of up to 15 million yuan ($2 million) for each vehicle-to-grid
project.
NO DEATH BLOW
China’s auto industry, a mix of state-owned and private
firms, has cost advantages over foreign competitors due in part to government
subsidies and the nation’s dominance of battery-minerals refining, analysts
say.
But the high level of competition in China’s EV market, the
world’s largest, has also driven companies to innovate in ways that have
brought down costs.
The EU provisional duties are set to apply by July 4, with
the investigation due to continue until Nov. 2, when definitive duties,
typically for five years, could be imposed.
Chinese EV maker stocks mostly shrugged off the news, which
was expected. The Hong Kong-listed shares of BYD closed up 5.8%.
“The EU tariff hike result is slightly positive for BYD vs
our previous tariff expectation of 30%, which improves BYD’s export growth
visibility into 2Q/3Q24,” Citi said in a research note.
Geely Auto rose 1.7% and Leap Motor gained 2.7% while Great
Wall Motor’s Hong Kong shares eased 1.2%. In Shanghai, shares of SAIC Motor
fell 1.6%.
Joe Mazur, senior analyst at research consultancy Trivium
China, said Chinese EV makers would be forced to pass along some of the cost
increases to consumers.
“But it’s by no means a death blow to the Chinese EV
industry in Europe,” he said.
Tesla expects to increase its Model 3 prices because of the
import duties on its China-made EVs.
Chinese automakers have charged more for exports than they
have in their home market, offering some protection from the tariffs. BYD, for
example, charges more than double — sometimes nearly triple — the price it gets
for three key models in China.
While European automakers are being challenged by an influx
of lower-cost EVs from Chinese rivals, there is virtually no support for
tariffs from the continent’s auto industry.
Some of the biggest opponents include Europe’s largest
automakers such as BMW, Volkswagen, Stellantis, and Mercedes Benz.
German automakers in particular are heavily dependent on
sales in China and fear retribution from Beijing. European auto firms also
import their own Chinese-made vehicles.
Shares in some of Europe’s biggest carmakers fell for a
second day on Thursday due to fears of Chinese retaliation.
Volvo Car was the biggest faller, down more than 7%.
Concerns over retaliation spread beyond the auto sector,
knocking shares in cognac maker Remy Cointreau. A trade body for French cognac
producers expressed deep concern on Wednesday over the EU’s tariff decision.
In January, China launched an anti-dumping investigation on
EU brandy imports, in a move seen as a response to the widening trade disputes
between Beijing and Brussels.
Global food companies from dairy producers to pork exporters are also on high alert for potential retaliation from China. -Reuters