\nprovides daily analysis of global automotive news and events,
\nproviding our clients timely context and impact analysis for
\nnavigating the fast-moving industry. This Behind the Headlines
\nseries offers a bi-weekly dive into the most recent top
\nstories.<\/em><\/p>\n
European Union provisional tariffs on mainland Chinese battery
\nelectric vehicles take effect<\/h2>\n
The European Commission put provisional tariffs on Chinese
\nbattery electric vehicles (BEVs) as of July 5, 2024. An
\ninvestigation, which began in September 2023 and concluded in June
\n2024, by the EU's legal arm determined that the BEV value chain in
\nChina benefits from unfair subsidization\u2014causing a threat of
\neconomic injury to European Union (EU) BEV producers. The
\ninvestigation also examined the likely consequences and impact of
\nthese tariffs on BEV importers and consumers in the EU.<\/p>\n
The commission imposed different levels of duty on the three
\nmain Chinese OEMs\u2014SAIC, BYD and Geely\u2014influenced by what
\nthey described as the amount of cooperation received from each,
\namong other factors. The full breakdown is:<\/p>\n
- \n
- BYD is subject to 17.4% additional duty for its Chinese-made
\nvehicles sold in the EU.<\/li>\n - The individual duties for Geely and SAIC are 19.9% and 37.6%,
\nrespectively.<\/li>\n - Other BEV producers in China who cooperated but were not as
\nthoroughly investigated are subject to a 20.8% weighted average
\nduty.<\/li>\n - The duty for other non-cooperating companies is 37.6%.<\/li>\n<\/ul>\n
These provisional duties will apply for a maximum duration of
\nfour months, during which period EU member states will vote and a
\nfinal decision will be made. If approved, definitive duties would
\nbe in place for five years. Tesla is the largest China-based
\nexporter to the EU by volume, and it may receive an individually
\ncalculated duty rate at the definitive stage.<\/p>\nThere has been pushback from the mainland China automakers
\naffected, including SAIC who has requested a hearing. SAIC insists
\nthat its cooperation and evidence was unfairly evaluated by the
\nCommission.<\/p>\nWith the US imposing 102.5% tariffs on Chinese EVs and Canada
\nconsidering similar duties, these measures imposed by the EU add to
\nChina's concerns that domestically based companies will face more
\ntrade barriers in global markets and will be pressured to shift
\nproduction somewhere else. Turkey has joined the countries imposing
\na tariff, while in Brazil the regional automakers' association is
\nnow calling for a 35% import tax.<\/p>\nHowever, perhaps counterintuitively, German automakers and the
\nindustry
\noppose the import tariffs<\/a>. The German Association of the
\nAutomotive Industry (VDA) has argued that the tariffs would not
\nonly affect Chinese manufacturers but also European companies and
\ntheir joint ventures in China in particular. “This is because a
\nlarge proportion of vehicle imports from China into the EU come
\nfrom European and American manufacturers,” said the VDA.<\/p>\nThe association further warned of the possibility of
\ncountermeasures from China; one potential is reports that Chinese
\nautomakers have requested the country's government to impose import
\ntariffs on EU-made vehicles with large engine displacements. In
\n2023, China was the third-largest export market for German-made
\ncars, in terms of units, after the United States and the United
\nKingdom. Volkswagen and BMW also issued statements opposing the
\nduties. Outside of Germany, Stellantis CEO Carlos Tavares expressed
\nsimilar criticism.<\/p>\nThe hefty duties will slow down the pace of some smaller-scale
\nmainland China-based automakers seeking to launch EV sales in
\nEurope with exported models. Major Chinese carmakers such as BYD,
\nhowever, are determined to expand into the global market.<\/p>\nFor these larger players, production outside of China may be an
\noption that skirts tariffs. BYD is expanding, including recently
\nopening a plant in Thailand, considering a plant in Mexico,
\ndeveloping a manufacturing base in Brazil, setting up a European
\nproduction plant in Hungary, and working with the Turkish
\ngovernment to set up a site there.<\/p>\nWhile the duties are meant to protect businesses long-term,
\nthere are often unintended consequences of such actions which can
\ntake years to reveal themselves. The reaction of the European
\nautomakers also demonstrates the complexity, as the tariff has
\npotential to hurt their business in both the EU and China. Western
\nautomakers planning or already exporting from mainland China to
\nglobal markets, including the EU, North America and Brazil, will
\nalso have to rethink sourcing plans.<\/p>\nIn the immediate term, consumers in the EU may well face higher
\nprices for BEVs. Tesla, MG and China's NIO have already indicated
\nthey may raise European prices of their Chinese-made models
\nfollowing the EU's decision. China may also retaliate with tariffs
\nagainst goods or services outside the auto industry.<\/p>\nAs a share of mainland China exports, Europe has grown from
\nseeing less than 0.5% of exports from the country in 2020 to 4.4%
\nin 2023; Europe is the largest region for mainland China exports
\ntoday, followed by Middle East\/Africa, at 1.6%, according to the
\nJune 2024 S&P Global Mobility light vehicle production
\nforecast. In 2020, nearly 93% of the vehicles produced in mainland
\nChina remained in the country. In 2023, 84% of the vehicles
\nproduced in the country were sold there. Over that same period,
\nlight vehicle production in mainland China grew 23%, from 23.3
\nmillion units in 2020 to 28.8 million in 2023.<\/p>\n![\"Mainland](\"https:\/\/cdn.ihsmarkit.com\/www\/images\/0724\/share-of-mainland-china-exports-by-destination_110720241110119.png\")
<\/p>\nBattery manufacturing ups and downs<\/h2>\n
Increasing battery manufacturing is among the elements needed
\nfor BEVs to be successful, in the sense that it contributes to
\nreducing cost. However, BEV adoption is in a particularly choppy
\nphase, likely to last through 2026, with inconsistent and uneven
\ngrowth.<\/p>\nAgainst that backdrop, Swedish battery company Northvolt
\nrecently announced a strategic review of its business, due to be
\ncompleted in third quarter 2024, evaluating timelines and capital
\nallocation. The company reported 19% growth in revenues in 2023, to
\nUS $128 million, but also 106% increase in adjusted losses, to US
\n$569 million. The company's CEO indicated that there may be a
\nrefocus to plans already in process, with projects not yet started
\nbeing reined in for now.<\/p>\nOn the other hand, Hyundai and LG Energy Solutions inaugurated
\ntheir joint venture battery plant in Indonesia on July 2
\n(production started earlier in the second quarter). The plant has
\nan annual capacity of 10 gigawatt hours (GWh). In the US, a joint
\nventure between PACCAR, Daimler Truck and Cummins, called Amplify,
\nbroke ground on a new plant due for production to start in 2027
\nwith annual production capacity of 21 GWh. And Stellantis announced
\na collaboration with a French research organization looking to
\ndevelop next-generation battery cell technology, though it's
\nunclear when that project will result in production-ready
\ntechnology.<\/p>\nGet Free Trial of
\nAutoIntelligence<\/a>.<\/p>\n\nCommercials Cooperation Advertisements:<\/b><\/h2>\r\n
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