The European Union‘s attempt to protect its carmakers from an existential threat from Chinese electric cars seems to have succeeded, and the expected incursion from the east over the rest of the decade looks survivable.
There will be a price though. The EU needs a massive increase in EV sales to make its 2035 CO2 emissions-based targets. That looks impossible under current conditions.
The EU has painted itself into a corner by decreeing all new cars must be electric by 2035 and close to 80% of sales by 2030. But its automakers lagged well behind the Chinese ability to make EVs for the masses. Should it stand behind its decree, make things easy for the Chinese and but bankrupt its own industry?
By making it a bit more difficult, but not too difficult, for the Chinese EV makers, it would appear to have given a lifeline to the European industry. But the hugely ambitious EV targets require a mass market and fast, and there’s no sign of that. If the current arrangements stand, its CO2-based EV targets might well be diluted.
Schmidt Automotive Research, in a report on Chinese manufacturers in Western Europe, said sales of Chinese EVs will reach 200,000 in 2024 and an EV market share of 9.9%, compare with just over 170,000 (8.8%) last year. Sales will hit just over 900,000 by 2030 for an 11% share.
Impressive but far from dominant.
Schmidt said EV sales in Western Europe will about quadruple to nearly 8.3 million in 2030 from just under 2 million this year.
The EU introduced provisional tariffs on July 5 that raised duties on some Chinese EVs in a range from 19% to 48%, including the current 10% duty. The tariffs will probably become permanent in November if approved by member states, and dependent on trade talks with China.
China has launched an investigation on trade generally with the EU, including possible tariffs on exports of dairy products, cognac and pork. China is also looking at import tariffs on mainly German high-margin gasoline vehicles. China has launched a World Trade Organization complaint. So there is much that could still go wrong.
If the provisional regime survives, experts reckon Chinese automakers will still prosper because their efficiency is up to 30% better than Europe’s.
Investment researcher Bernstein agrees Chinese EV makers will weather the tariff storm.
“The additional countervailing duties would dent the profitability of Chinese EV exports but won’t stop the Chinese (manufacturers) from expanding into the EU, which still presents a very lucrative opportunity. We estimate that BYD’s exports to the EU will still be significantly more profitable than domestic sales in China,” Bernstein said in a recent report.
Chinese automakers like BYD in Hungary and Turkey, Stellantis affiliate Leapmotor in Poland, SAIC and Chery perhaps in Spain, Hungary or Czechia, Dongfeng in Italy, and VW affiliate Xpeng, are moving quickly to set up factories in Europe. China, because of its EV success, might appear to have the upper hand in tariff negotiations, but over-production in China and a weak home market make high-value export markets like Europe very desirable for the Chinese, especially as the U.S. market promises a 100% tariff.
Global research house Rho Motion said the Chinese have moved swiftly to bolster their EV business in Europe.
“Chinese EV manufacturers have certainly had the fire lit under them this year to diversify their geographical supply chain, thanks to sudden increases in tariffs. The result of which sees Chinese manufacturers significantly accelerating their current plans and announcing fresh sites in new territories,” Yu (Frank) Du, China Research Lead at Rho Motion told a webinar.
Schmidt, in his report, said after the tariffs, Chinese manufacturers were likely to be less aggressive than previously expected and growth will be slower.
“Between 2027 and 2030 we expect Chinese share of the total region (EV market) to stagnate at between 10% and 12% with volumes rising to just over 900,000 by 2030, a year which will see a further 55% fall in EU CO2 fleet emissions levels over 2020/21 levels, although a mid-term review in 2026 still needs to confirm this goal. Brussels-based think tanks have said they expect some adjustment to be allowed for vehicles being powered by e-fuels to be introduced as part of the 2026 review,” Schmidt said in the report.
Schmidt said BYD is likely to be the leading Chinese EV brand in Europe from 2027.
“We fully expect German premium brands to retain their status quo current market positions, especially as the VW Group begins to roll out its premium electric models and BMW, its Neue-KlAsse EV-dedicated platform from 2025,” he said.
Volume operators like Renault, Volkswagen brand, Stellantis’s Peugeot, Fiat, Opel and Vauxhall will be most exposed to the Chinese,
“By 2027, we believe that over half of Chinese branded models will be manufactured in Europe and Turkey,” Schmidt said.
