Germany’s automakers in particular have a lot to lose in
China and the announcement on Wednesday leaves them fretting over a decision
BMW CEO Oliver Zipse described as the “wrong way to go”.
Tariffs on Chinese-made electric vehicles of up to 38.1% -
equating to billions of euros – will be levied from July, but that is unlikely
to deter China’s automakers from exporting to Europe because they can absorb
the extra cost and still make a profit.
Most Chinese automakers remained quiet after the tariffs
were announced, but EV maker Nio said that while it opposed the decision, in
Europe its “commitment to the EV market remains unwavering”.
Also, China’s BYD and Chery have already announced plans to
build cars in Europe, which would avoid the tariffs.
Will Roberts, head of automotive research at Rho Motion,
said that while Chinese automakers have room to absorb tariffs, the “true test
from today’s announcement will be whether Beijing will retaliate in kind”.
“Europe’s manufacturers still rely on the Chinese market, so
declining profits from the East would only slow their ability to transition
effectively” to electric vehicles, he added.
HIGH STAKES
It has become a high-stakes game for Germany’s automakers.
China accounted for nearly 32% of sales at BMW in the first
quarter and around 30% for rivals Volkswagen and Mercedes-Benz.
VW shares fell 1.2% on Wednesday, among the biggest
decliners on the euro zone’s blue-chip stock index, BMW dropped 0.9% to its
lowest since November and Mercedes was down 0.5% at its weakest since February.
Retaliation could thus be painful for those companies and
Germany’s manufacturing economy, prompting Chancellor Olaf Scholz to warn
during a speech at an Opel factory at the weekend that “isolationism and
unlawful customs barriers…that ultimately only makes everything more expensive
and everyone poorer.”
VW said the “negative effects” of the tariffs “outweigh any
potential benefits for the European and especially the German automotive
industry”.
Mercedes CEO Ola Kaellenius said the “dismantling of
restrictions and expansion of fair and free trade has led to economic growth.
So we shouldn’t go in the other direction now”.
But the tariffs will also hit the cars that European
automakers have made in China for European consumers.
Renault, for instance, imports the affordable Chinese-made
Dacia Spring EV into Europe, and its Chinese joint venture partner Dongfeng is
on the list of those companies likely to be hit with a 21% tariff.
Renault did not comment on the EU’s tariff announcement.
Tesla imports Chinese-made EVs into Europe and BMW imports
Mini EVs and the iX3.
Europe’s auto industry is also reliant on Chinese
components, particularly for EVs as China dominates so much of the supply
chain.
Speaking to analysts last month, BMW CEO Zipse warned that
sparking a trade war could have dire consequences for the transition to EVs
because it is impossible to make cars in Europe without Chinese imports.
“There is no Green Deal in Europe without resources from
China,” Zipse said.