To protect the domestic market from unfair competition from China, the European Commission is imposing temporary tariffs on Chinese electric cars. For some manufacturers, the tariffs could reach 48 percent. If member states do not object within four months, the EU could make the tariffs permanent this autumn.
To Bypassing tariffs Chinese green vehicle manufacturers join forces with local industrymaking their cars considered domestic. Without these measures, Chinese electric cars could become thousands of euros more expensive for consumers or even unattainable.
This is how China conquers Europe
Chery Automobile has entered into cooperation with the Spanish company Ebro-EV MotorsBy the end of the year, Chery hopes to begin production of the Omoda E5 at a former Nissan Motor plant near Barcelona’s cargo port. Chery and Ebro plan to produce 150,000 cars a year at the Spanish plant by 2029. The company is also looking for a location for a second production plant in Europe.
In Poland at the production plant in Tychy, belonging to the Fiat Stellantis group, fully electric city cars are already rolling off the assembly line T03 by Chinese manufacturer Leapmotor. The plant uses semi-assembly kits that can be assembled at any Stellantis plant in the world. Cars assembled from kits shipped to Poland will generate a gross profit of around 3,200 euros per car.
BYD has announced plans to build its own factory in Hungary, and another is on the horizon in Turkey, while Zeekr is considering manufacturing at factories owned by parent company Geely, which owns Volvo Cars plants in Sweden and Belgium.
Some factories in Europe that produce Chinese cars are planned or in operation / Bloomberg
Europe is the most profitable market
Chinese EV makers have so far captured less than 10 percent of the European market, but the Old Continent is still the most profitable market for companies like Nio and Xpeng.
According to BloombergNEF, if current prices of Chinese cars remain unchanged, the tariffs will significantly reduce profits. Estimated the margin on the MG4 EV owned by Chinese state SAIC could fall from 25% currently to just 1%. Some of this could be avoided if the company raised prices, but then SAIC would lose its price advantage over its European competitors. So Chinese companies are looking for ways to circumvent European tariffs to avoid losing profit or subjecting customers to the pain of buying at higher prices.
Questions about rebranding
The European Commission is still determining how the new tariffs will apply to joint ventures that were not part of its anti-subsidy investigation.
Meanwhile, some governments are closely monitoring attempts to introduce Chinese cars into the EU. In June, the Italian antitrust authority fined DR Automobiles €6 million after finding that It illegally labeled vehicles from Chinese manufacturers, including Chery, as Italian. DR said it plans to appeal the decision, and its vehicles are only 60-70 percent pre-assembled in China.
“It is logical that countries like Italy are concerned about job preservation and are closely monitoring what is happening in their domestic market,” Alexandre Marian, partner and managing director at AlixPartners, told Bloomberg. But Marian still expects Chinese companies will continue to expand in Europe, potentially by taking over plants that local producers want to close or sell.
“Chinese manufacturers are incredibly determined,” he said. “They always find a way around a problem, and once they set a goal, they find a way to achieve it,” he added.