Semafor Signals
Supported by
Insights from Central European Institute of Asian Studies, Royal United Services Institute, and the Rhodium Group
The News
The EU is “advancing” its probe into Chinese electric vehicles as the bloc aims to curb China’s overcapacity of green tech ahead of Xi Jinping’s visit to Europe next week, EU trade chief Valdis Dombrovskis told Politico.
Dombrovskis hinted that Brussels could impose tariffs on Chinese EVs “before the summer break” as European firms struggle to compete with Chinese goods. Those actions seem more likely after the European Commission warned Chinese EV makers BYD, SAIC, and Geely that they had provided insufficient data in the anti-subsidy investigation, Reuters reported.
European lawmakers are still hoping they can convince Xi to scale back his protectionist economic model to allow for more equitable competition in green tech. But China-friendly countries, notably Hungary — which plays a significant role in Europe’s own EV production — are making it more challenging for Brussels to counter Chinese competition. Tariffs may also do little to slow Chinese imports, some analysts believe.
SIGNALS
Sales of Chinese-made EVs drop in France
Source: Reuters
Instead of waiting for the EU to impose tariffs on Chinese EVs, France last year excluded Chinese-made EVs from its cash bonus scheme where new buyers can get subsidies of up to $7,500 for certain EV models. Within four months, the scheme already had a sizable impact: Tesla’s Model 3, the Dacia Spring, and the SAIC MG4 EVs —- all assembled in China — had a market share of 22% in the months before the scheme’s implementation. That share dropped to just 4% in April, according to a Reuters analysis, which France touted as a sign that such measures can help boost sales of European-made cars.
EU can’t alienate China-friendly Hungary
Sources: Royal United Services Institute, Central European Institute of Asian Studies, European Council on Foreign Relations
Hungary is embracing Chinese investments — Beijing became its biggest investor in 2023 — and has become a hub for Chinese EV parts production. Despite it’s growing economic ties with China, the EU cannot risk alienating Budapest given its crucial role in the supply chain of European automakers, as companies like Mercedes-Benz and BMW open new factories there, China analyst Sari Arho Havrén of the Royal United Services Institute, a security think tank, told Semafor. But “it’s clear that China has an advantage” in Hungarian investment, and Europe will struggle to catch up to the financial demands of cash-strapped Hungary, according to China analyst Sebestyén Hompot of the Central European Institute of Asian Studies. That’s sounding alarms in Brussels, where lawmakers learned the hard way not to rely on adversaries like Russia for energy.
Tariffs will likely not stop Chinese EV makers from selling in Europe
Source: Rhodium Group
Chinese EV makers are making huge profits selling in Europe as the EV price war in China has lowered prices significantly. BYD’s Seal U model makes the company a profit of about $15,000 in the EU for every sale, compared to just $1,400 when sold in China, according to a Rhodium Group analysis. The EU is considering a 30% duty on EV imports, but that number would still leave BYD with a 15% EU premium compared to its China profits, per Rhodium’s calculations. Only a 40% to 50% tariff could make a dent on BYD’s profits, but that figure is unrealistic because of World Trade Organization rules that the EU must abide by.
