Chinese EVs Face Tariff Storm: Strategies for High Tariff Crisis
The European Union (EU) conducted a vote on October 4th, ultimately deciding to impose a five-year countervailing duty on pure electric vehicles from China. This proposal received the necessary support from EU member states, and the European Commission (Commission) announced tariffs of up to 45% on pure electric vehicles imported from China.
Despite the passage of the tariff proposal, the Commission stated in a declaration that the EU and China will continue to negotiate on this issue, exploring alternative solutions that comply with World Trade Organization (WTO) rules. The solution must effectively address the subsidy issues found by the Commission's investigation and ensure its monitorability and enforceability. This means that although the implementation of tariffs seems inevitable, there is still room for maneuver in subsequent negotiations between the two parties.
Sources from the relevant car companies also revealed to reporters that the tariff proposal has not been finally confirmed, and there is still room for adjustment between the two parties. The focus at this stage is to continue to pay attention to the progress of the negotiations and actively respond to possible changes.
It is worth noting that Chinese car companies subject to tariffs, such as BYD, Changan Automobile, and Xiaopeng Motors, have been accelerating their localization production layout in Europe.
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Zhang Xiang, Secretary-General of the International Intelligent Transportation Technology Association, told reporters that the countervailing duty policy introduced by the EU may only be temporary, especially after the results of the US election are announced, this policy is expected to be gradually lifted. Zhang Xiang also pointed out that although the policy damages the interests of enterprises and consumers on both sides of China and Europe, it may further promote cooperation between Chinese car companies and European car companies, especially in terms of technology exchange and market access progress.
Seizing the core of the European automotive industry
The export of Chinese new energy vehicles to Europe, as the world's second-largest new energy vehicle market, is an important strategic place that cannot be bypassed. In the European market, Germany, as the core of the global automotive industry, has become a must-pass road for Chinese car companies to enter Europe. To stand firm in the European market, it is crucial to enter Germany, the "heart of the automotive industry", Chinese car companies are clear about this and have taken corresponding strategies.
In fact, Chinese car companies have deepened their cooperation with the German market.
On August 31st, the European dealer group Hedin Mobility announced an agreement with BYD to sell its subsidiary Hedin Electric Mobility to BYD, making it the designated dealer of BYD in the German market. This acquisition also includes two stores in Stuttgart and Frankfurt, which means BYD will directly control its sales business in Germany, get rid of dependence on importers, and further enhance its autonomy in the German market.
Not only BYD, but Changan Automobile is also accelerating its layout in Europe. On September 3rd, Changan Automobile announced that its German subsidiary was officially registered in Munich. In addition to being responsible for sales, marketing, and services, Changan's German subsidiary will also focus on key businesses such as customer insights, market research, technical regulations, and product localization.Xpeng Motors also views Germany as a crucial node in its European expansion. In March of this year, Xpeng announced its official entry into the German market, emphasizing that Germany is the core of the global automotive industry. Markus Schrick, the head of Xpeng Germany, pointed out that entering Germany is a key step for Xpeng Motors to step into the global market, showing its determination to occupy a place in the fiercely competitive global automotive market.
However, with the European Union launching an anti-subsidy investigation into Chinese new energy vehicles in September last year, the sales of Chinese new energy vehicles in Europe have been significantly affected. Data from the General Administration of Customs shows that in the first half of this year, China's exports of electric vehicles to the 27 EU countries were about 220,000 units, a year-on-year decrease of about 15%. Among them, the export volume in June fell to 27,000 units, a new low for the year, a month-on-month decrease of 25%, and a year-on-year decrease of 31%. Since the EU began to implement temporary anti-subsidy duties on July 5, Dataforce data shows that the registration volume of Chinese electric vehicles in Europe in July has plummeted, with SAIC's MG brand down 20% year-on-year, and Polestar down 42%.
Nevertheless, the extent to which different car companies are affected varies. BYD, Geely, Changan, and other car companies have still achieved growth against the trend, benefiting from the low base effect of the same period last year and an active localization strategy. In August, China's overall car exports to the EU increased by 13.39% year-on-year, showing that some brands still have strong market competitiveness.
Zhang Xiang pointed out that in the long run, China and Europe still have strong complementarity in the field of new energy vehicles. China has advantages in new energy technology, while the EU has strong capabilities in traditional fuel vehicles, especially in the luxury brand sector. The EU's current anti-subsidy tariff policy may only be temporary. With changes in the political situation, especially after the US election, the policy is expected to be gradually lifted, as it has brought negative impacts to both Chinese and European companies and consumers.
Wang Peng, a researcher at the Beijing Academy of Social Sciences, also said that although tariff barriers will have an impact on short-term trade, the potential for technological cooperation between China and Europe in the field of new energy vehicles remains huge, especially in cutting-edge areas such as battery technology, charging infrastructure, and autonomous driving. In the future, both sides are expected to further deepen cooperation in areas such as intelligence, connectivity, and sharing, to find new growth points and business models to meet consumers' demand for high-performance new energy vehicles.
Promote localized production in Europe
At present, the Chinese government hopes to resolve the anti-subsidy issue of new energy vehicles with the EU through dialogue, to avoid further escalation of trade frictions, and to create a fair industrial cooperation environment.
At the same time, with the EU's launch of an anti-subsidy investigation into Chinese new energy vehicles last year, more and more Chinese car companies have accelerated the pace of localized production in Europe to actively respond to the upcoming tariff pressure.
At the end of last year, BYD announced that it would build a new energy vehicle production base in Szeged, Hungary, which will produce both vehicles and batteries, and plans to start production in 2025.
In addition, to eliminate European users' concerns about data security, BYD's executive vice president, Li Ke, said that BYD is building data centers in European countries to ensure that data collected locally will not be transmitted back to China.Changan Automobile is also adopting a similar strategy. The company has announced that, considering the EU's plan to impose additional tariffs on Chinese-made electric vehicles, Changan is advancing the localization process of car assembly and actively evaluating the possibility of establishing its own assembly plant in Europe. In September, Changan Automobile set up a new subsidiary in Munich, Germany, taking an important step in expanding the European market.
Xpeng Motors has further clarified its plans for localization. Xpeng Motors CEO He Xiaopeng revealed in an interview that the company is looking for factory locations in Europe to avoid the negative impact of future tariff increases. He pointed out that Xpeng Motors' technological advantages in artificial intelligence and intelligent driving systems are one of the core competencies of the company's entry into the European market. He Xiaopeng also mentioned that part of the future localization production plan is to establish a large data center to ensure the security and stability of intelligent driving data.
He Xiaopeng also revealed that Xpeng Motors plans to build factories in areas with "lower labor risks," hoping to ensure smooth production through reasonable site selection strategies while reducing potential production costs. He believes that the efficient use of software and data is the core of intelligent car technology, so the construction of the data center will become one of the key factors for Xpeng Motors' success in the European market.
Famous strategic positioning expert Zhan Junhao believes that Chinese car companies like BYD can effectively reduce the adverse effects of tariffs and enhance data security by establishing manufacturing and data centers globally. This global layout not only helps enterprises better integrate into the local market but also improves operational efficiency and reduces the risk of trade barriers.
Zhan Junhao further pointed out that in addition to strengthening localization, Chinese car companies also need to continue to increase investment in technological innovation and R&D to improve product quality and performance, thus better meeting the needs of global consumers. He believes that international cooperation is also an effective way to deal with trade barriers. Chinese car companies can seek more growth opportunities through technological cooperation and joint development of new markets with European counterparts.
Regarding data security issues, Zhang Xiang also pointed out that Chinese car companies establishing data centers overseas can effectively reduce the risk of being questioned about data security. He emphasized that if some countries use data security as an excuse to block the sale of Chinese electric vehicles, it will cause huge losses to enterprises. Data security issues are not only related to the market development of car companies overseas but also involve the preparation for product collision safety, quality, and other aspects. Therefore, before entering the European market, Chinese car companies should take relevant preventive measures to cope with potential political and economic risks.
The quality of Chinese electric vehicles has also been recognized by the European market. According to the car test report released by the German Automobile Club (ADAC) in April this year, Chinese-made electric vehicles performed well. The report pointed out that current Chinese electric vehicles have gotten rid of the past image of technologically backward, unsafe, and cheap cars. Most Chinese brand models scored high in safety collision tests, battery technology is also very mature, the driving range is satisfactory, and even in terms of processing quality, they are not inferior to established European competitors.
Nevertheless, the ADAC report also pointed out that Chinese electric vehicles still have room for improvement in areas such as driving assistance systems and air conditioning systems. Technical improvements in these fields will become key factors for Chinese car companies to further enhance product competitiveness.