German automakers such as BMW, Mercedes-Benz and Volkswagen could be hit hard by retaliatory tariffs because they all have huge production plants in China.
Germany could try to stop the European Union from imposing higher tariffs on Chinese electric vehicles (EVs), which will reportedly come into effect on July 4, or at least weaken them.
The European Union recently revealed that it could impose tariffs of up to 38.1% on Chinese EV manufacturers. This follows an investigation launched by the EU into several manufacturers following claims that the Chinese government had heavily subsidized them. This allowed manufacturers to sell their vehicles in the EU at greatly reduced prices.
Chinese EV manufacturers such as BYD, Geely and SAIC Motor are expected to be affected by the EU action.
For its part, China has already hinted that tariffs will be imposed on EU-made vehicles with large engines, which could be potentially disastrous for companies such as BMW, Mercedes-Benz and Porsche.
German Chancellor Olaf Scholz has already emphasized that EU tariffs could have far-reaching consequences, especially when it comes to job creation in Germany.
In a recent Associated Press statement, Scholz said: “Isolation and illegal customs barriers – that ultimately makes everything more expensive and everyone poorer. We do not close our markets to foreign companies, because we do not want that for our companies either.”
German manufacturers like BMW, Volkswagen and Mercedes-Benz could also be affected in a few other ways, as they have set up huge car production plants in China and are benefiting from Chinese subsidies and grants, such as cheaper land and relatively relaxed taxes and other things. regulations.
In the event of any retaliatory tariffs, German automakers could potentially withdraw these benefits. Furthermore, most German automakers see the majority of their current sales coming from the Chinese market, so in the event of an escalating trade war, these sales could also be affected.
Without Chinese electric vehicles, Europe could struggle to meet net-zero targets
European consumers are increasingly choosing Chinese electric vehicles over European ones, due to their affordability and incentives such as two years of free charging, dashboard cameras and more.
With the rising cost of living over the past few years, European electric vehicles have become out of reach for most consumers due to their cost. As such, Chinese electric vehicles could be one of the few ways Europe is still on track to meet its net-zero targets.
Thom Groot, CEO of The Electric Car Scheme, said in an email note: “Germany’s last-minute attempt to halt or soften new tariffs on electric cars from China should be welcomed by consumers. The latest data from the International Energy Agency (IEA) makes it clear that we cannot meet our EV goals without the help of Chinese manufacturers.
“57% of all new battery electric vehicle registrations come from China, yet there is significant resistance to allowing these vehicles into the UK and European markets. If we are serious about achieving our 100% target by 2035 and our overall net zero ambitions, we must embrace these technological inputs and not shy away from them.
“While there have been discussions about national security and cyber attacks involving Chinese EVs, tariffs, which punish less affluent consumers the most, are clearly not the answer. Our research shows that for 68% of people, costs are the biggest barrier to purchasing an electric car.
Jochen Stanzl, chief market analyst at CMC Markets, said: “The European Union may have shot itself in the foot with its tariffs on Chinese carmakers. At 38%, these rates are much lower than the 100% imposed by the US government.
“They are not high enough to protect Volkswagen, BMW and Mercedes from cheap competition from the Far East as they switch from combustion engines to electric vehicles. It is understandable that Germany is trying to block these tariffs, as they could do more harm than good.
“With such low rates, German automakers would find it even more challenging to compete with Chinese rivals. While car shares dragged Germany’s DAX index down significantly yesterday, there was a rally in shares of Chinese EV manufacturers. Things could get worse: the Chinese government could now take retaliatory measures. Germany is trying to break this potentially damaging feedback loop.”
Russ Mould, investment director at AJ Bell, said: “It may be that the EU could better focus on how to stimulate demand for electric vehicles at a time when it appears to be leveling off, such as Umicore’s profit warning this week suggested.
“Consumers appear wary of electric vehicle costs, range, availability of charging infrastructure, as well as what to do with the battery when an electric car is no longer needed.
ADVERTISEMENT“Proactively addressing all these issues may be a better course of action than opening a new trade war, especially as the EU seeks to promote the adoption of electric vehicles and phase out the internal combustion engine (ICE) by 2035. Making cheap electric cars more expensive through tariffs is a strange way to do that.”