July 21, 2024
Industry News

Chinese retaliation forces European carmakers to confront consequences of EU tariffs

The European Commission will impose additional duties of up to 38.1% on imported electric vehicles from China starting in July. This move is expected to trigger a response from Beijing.

The auto industry in Europe had cautioned against implementing these tariffs, particularly German car manufacturers who have a significant exposure to the Chinese market. Trade data from 2023 shows that almost a third of their sales come from China.

Other European automakers have largely divested their China operations, but they could still be indirectly impacted through their investments.

A breakdown of the brands with exposure to China is as follows:

MERCEDES-BENZ

China represents a third of Mercedes-Benz’s unit sales, with nearly one in five cars sold there being imported from Germany. The premium automaker exports high-end models like the S-Class and Maybach to China, while producing mid-range models locally.

Analysts anticipate that retaliatory tariffs on German-made cars could disproportionately affect Mercedes-Benz’s profits, unless offset by increased prices.

BMW

BMW generates almost a third of its unit sales in China, but only 13% of those come from imported cars, mainly high-end vehicles. The company has a joint venture with Brilliance Automotive in China to produce cars for the local market and for export to Europe.

VOLKSWAGEN

Volkswagen holds a significant share of the Chinese market with 14.5% and aims to increase its market share to 15% by 2030. The company has localised production in China, reducing sales of imports from Germany to just 2.5%.

BMW and Volkswagen have pledged over $5 billion to expand research and production in China, with a focus on electric vehicles.

PORSCHE

Porsche, a luxury carmaker owned by Volkswagen, relies heavily on China for sales, with all of its sales in the first quarter coming from imported vehicles. The premium sector’s pricing power may allow Porsche to pass on tariffs to consumers.

VOLVO CAR

Volvo Car generates a quarter of its unit sales in China, but only around 10% of its profits. The company has started shifting some electric vehicle production to Belgium ahead of the EU tariff decision.

STELLANTIS

Stellantis has minimal exposure to China, with its main presence stemming from an investment in Leapmotor. The company plans to export two electric vehicle models from China by the end of the year.

FERRARI

Ferrari, like other luxury carmakers, imports all of its sales in China. However, with just 9% of its total sales coming from China, it has the lowest regional exposure.

RENAULT

Renault has the smallest exposure to China among the brands listed, with joint ventures in the country and a focus on developing combustion and hybrid engines with Chinese partner Geely.

 

FAQ

1. What is the reason behind the European Commission’s decision to impose additional duties on imported electric vehicles from China?

The European Commission aims to address unfair competition and level the playing field in the automotive industry.

2. How are German carmakers specifically affected by these tariffs?

German carmakers, such as Mercedes-Benz and BMW, have a significant portion of their sales coming from China, making them vulnerable to potential retaliatory measures from Beijing.

Conclusion

The imposition of additional duties on imported electric vehicles from China by the European Commission is expected to have a significant impact on the automotive industry, particularly on brands with exposure to the Chinese market. Companies will need to strategize and adapt to mitigate the effects of these tariffs.

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