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CNN, London —
The European Union may have given Tesla a boost in future sales in the region by setting tariffs on its China-made vehicles that are significantly lower than those imposed on rival electric car makers.
The high-profile decision comes two months after the EU increased tariffs on all electric vehicles imported from China, claiming “unfair” government subsidies were giving Chinese electric car makers an unfair advantage at the expense of European manufacturers.
Tesla, which has a factory near Berlin and exports many of its cars made in China to Europe, had asked the EU to recalculate the tax rate, which was originally set at 20.8%.
The European Commission, the EU's executive body, set the rate at 9 percent on Tuesday.
This is on top of the EU's existing 10% tariff on all EV imports, but is still far below the additional tariffs of 17% to 36.3% imposed on other Chinese automakers.
The European Commission said the tariffs reflect the “level of subsidies” Tesla received in China.
“The European Commission verified the information during its visit to China and conducted similar testing to other sampled Chinese exporters,” the statement added. CNN has reached out to Tesla for comment.
Gregor Sebastian, a senior analyst at think tank Rhodium Group, said he was “surprised” that Tesla's tariffs were set at “just 9%.” He pointed to the company's local government loans in Shanghai and subsidized batteries from Chinese battery maker CATL.
“But without seeing all of the information and methodology the committee used, it's hard to make a strong argument here,” he added.
He told CNN that while the tariffs would “still be a negative” for Tesla, they could give it “some breathing room” compared to its current main European rival, SAIC, which “is really going to struggle.”
The Chinese state-owned car maker, which owns the iconic car brand MG, was hit with an additional 36.3 percent tariff reserved for “non-cooperating companies”, according to the European Commission.
Geely Automobile, which owns Sweden's Volvo, has been hit with an additional 19.3% tariff, while cars made by BYD, which is competing with Tesla for the title of world's largest seller of battery electric vehicles, will face an additional 17% tariff.
The European Commission said these tariffs were slightly lower than those proposed in June after a more thorough investigation and input from automakers.
Some Chinese companies that have joint ventures with EU carmakers may also benefit from lower tariffs, set at 21.3 percent, rather than automatically being hit with the higher rate of 36.3 percent.
China's Ministry of Commerce said on Tuesday it “firmly opposes and is extremely concerned” about the EU's decision to impose tariffs on electric vehicles after a thorough investigation into Chinese-made EVs. In a statement, the ministry called the findings “distorted” and vowed to “resolutely safeguard the legitimate rights and interests of Chinese companies.”
After the first set of EU tariffs took effect in July, Tesla raised the price of its Model 3 in Europe by about 4%, or 1,500 euros ($1,666), to 42,490 euros ($42,177), blaming the additional tariffs.
Still, the Model 3 is still cheaper than the BYD Seal, according to George Whitcomb, an auto research analyst at consulting firm LowMotion. “The reduction in Tesla's tariffs will help the Model 3 remain competitive with other Chinese-made EVs in Europe,” Whitcomb told CNN.
Meanwhile, BYD has yet to raise prices in Europe, despite steep tariffs.
“BYD has a much higher capacity to absorb these additional tariffs because its production costs are much lower compared to prices in Europe,” said Rhodium Group's Sebastian, who estimates BYD could absorb up to 45% of the EU tariffs.
The company could also increase exports of plug-in hybrid electric vehicles, which Tesla doesn't make, since the tariffs only apply to battery electric vehicles. And in the future, BYD could avoid the tariffs entirely by building cars for the EU market in Turkey, where imports from Turkey are free of tariffs.
Chinese EV makers are unlikely to abandon the European market despite higher tariffs, as Europe accounted for more than a third of their exports last year and is bigger than the next five largest markets combined, according to Citi.
Whitcomb said Chinese automakers were enjoying “huge benefits” from sales in Europe.
