BYD at the British Motor Show in Farnborough this week. (Getty Images)
The European Union imposed tariffs to protect its own automakers from lower-cost competition, slowing the influx of Chinese-made electric vehicles in July.
The number of new electric vehicles registered in the EU last month by Chinese automakers such as BYD and SAIC's MG fell 45% from June, according to a Dataforce survey covering the 16 member states that have released figures for July so far.
The drop may have been exaggerated as automakers rushed to get EVs to dealerships before the additional taxes took effect on July 5.
“There was a big move by Chinese manufacturers to clear inventory in June,” said Matthias Schmidt, an independent auto analyst based near Hamburg. “That's likely what caused the inventory depletion.”
The interim tariffs, which would raise import duties to as much as 48 percent, are intended to protect key EU industries from Chinese rivals who have structural advantages in key areas such as battery technology that benefit from government subsidies. Political tensions remain high, with Beijing threatening retaliation amid talks to resolve the issue.
Overall, Chinese brands aren't far behind with EV sales down 36% in the 16 countries tracked by Dataforce. BMW, Stellantis and Tesla also import Chinese-made EVs that are subject to high EU tariffs. For Western companies that have been more careful in managing their inventories, the June surge was less pronounced, Schmidt said.
The July figures show little to suggest that Chinese brands have softened their expansion ambitions in Europe.
Since their launch in 2019, manufacturers such as MG and BYD have seen steady growth, with their share of the EU electric vehicle market standing at 8.5% in July, up from 7.4% a year earlier, according to Dataforce figures. EVs still make up a small part of the European market, but they will become more mainstream over time as internal combustion engine vehicles are phased out.
BYD sold three times as many EVs in 16 markets in July compared to a year ago. MG, a unit of Chinese state-owned SAIC, saw its sales fall 20% in July compared to a year ago, while Polestar's sales fell 42%.
“BYD's price increases really cushion the decline for Chinese brands,” said Dataforce analyst Julian Litzinger.
China's best-selling auto brand is expanding in Europe, with BYD sponsoring the Euro 2024 soccer tournament in Germany, putting the company in front of a television audience of 5 billion people.
For now, BYD's pricing strategy in Europe remains unchanged after the tariffs, and the company signaled its readiness to withstand higher tariffs as it enters Poland on August 6 and builds a new factory in Hungary.
The new tariffs were introduced after an EU investigation found that Beijing's subsidies to the EV industry were causing economic harm to automakers in the bloc. MG will face an additional 37.6% tariff on top of the current 10% rate, while Volvo's parent company Geely Automobile Holdings and BYD will pay additional tariffs of 19.9% and 17.4% respectively. The tariffs will become permanent in November unless a deal is reached between the EU and Beijing.
The debate over tariffs comes at a time when global sales of electric vehicles are slowing, putting pressure on manufacturers in different regions as EU policymakers try to balance protecting jobs with a goal of phasing out new fossil fuel-powered cars by 2035.
Dataforce figures for July include the EU's largest markets, including Germany, France and Italy, and results for all 27 countries are due to be published later this month.
In Germany, Chinese brands made up 8% of car registrations in July, down from 13% in June, according to Dataforce. In France, they fell to 5% from 8%. In the UK, which is not part of the EU, Chinese brands have risen to prominence.
European automakers including Volkswagen AG and Stellantis NV are forming EV partnerships with Chinese automakers to cut costs and stay competitive, and Chinese automakers are also accelerating plans to assemble electric vehicles in Europe.
Schmidt said BYD could afford to absorb the tariffs and expand more aggressively into Europe, adding that a lack of shipping capacity was slowing the expansion.
“It's a question of perseverance,” Schmidt said. “If you want Europe to work, you have to knock on Europe's door.”
