Will tariffs on electric cars from China not help anyway? “The world has never seen an industry of this size”

Luc Williams

According to Dunne Insights, a company monitoring the automotive market in China and other Asian countries, in 2023, only about 25 million cars were sold in the domestic Chinese market – CNBC reported. Therefore, in order to discharge the surplus of production, China is increasingly choosing to export. According to Dunne Insights CEO Michael Dunne, Last year, China exported cars to over 100 countries.

As CNBC reported, Dunne and other experts say it's only a matter of time before Chinese-branded cars appear in the US. Several brands such as Volvo and its subsidiary Polestaris already owned by a Chinese company Geelyeven though these brands are based in Sweden. Dunne, quoted by CNBC, calls the Chinese automotive industry “the great Godzilla.” “The world has never seen an auto industry of this size and scale,” Dunne said.

The tariffs are intended to stop the flow of Chinese cars

Research shows that a large proportion of American customers, especially younger ones, would be happy to buy a Chinese car, despite widespread privacy concerns. However, not all Americans share this enthusiasm.

Last month President Joe Biden introduced stiff tariffs on Chinese electric vehicles. The additional tariffs effectively doubled the list price of Chinese cars, which without the additional fee could have cost just $11,500.

The European Union has a similar position. The European Commission announced on June 12 a temporary decision to increase customs duties on electric vehicles (BEV) produced in China and exported to the European Union. If China and the EU fail to reach an agreement, additional tariffs ranging from 17.4% to 38.1%, which will be added to the existing rate of 10%, will come into force on July 4.

The Biden administration, like the European Commission, claims that Chinese companies have benefited from unfair government support, and the import of Chinese electric vehicles threatens domestic investments in electric vehicles.

Criticism of tariffs from producers

As reported by CNBC, Tesla's CEO Elon Musk, criticized the tariffs, but earlier in 2024 said that without trade barriers, most Western automakers would be devastated by Chinese competition. Several automotive industry insiders are skeptical whether tariffs will be able to stop Chinese imports for a long time. Some say they can even do more harm than good.

According to Bloomberg, the German business chamber stated thatThe European Union should invest to become more competitive, instead of raising tariffs for electric vehicles manufactured in China.

The German government is working to prevent new EU tariffs on Chinese electric vehicles from coming into force, or at least ease them if a complete halt is not possible. Beijing has threatened retaliation against agriculture, aviation and large-engine cars. Any tit-for-tat solutions could harm German manufacturers, including Volkswagen, Mercedes-Benz and BMWwho rely heavily on sales in the world's largest automotive market.

The most important challenges for German companies in China / Bloomberg

German companies have a slightly more positive attitude towards China

A study by the German Chamber of Commerce shows that three-quarters of German companies in China reported excess capacity in their industries, and 20 percent found it to be significant. Most viewed overcapacity as a recent phenomenon. About half said they started noticing excess capacity in the past year, and 35 percent stated that this had occurred in the last five years.

The study also showed that German companies have a slightly more positive attitude towards China compared to last year, although fewer companies plan to increase their investments in the short term.

About 38 percent respondents expected the outlook for their industries to worsen this year compared to last year, down from 52% when companies were asked the same question in September. Just over half plan to increase investment in the next two years, up from 61%. last year.


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