Trade Defence: Where To Next For EU’s EV & Battery Trade Policy

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T&E analyses the impact of provisional tariffs on China-made EVs, as well as the likelihood of gigafactory investments going ahead.

This is a summary. For more, download the full analysis.

Following the anti-subsidy investigation, the European Commission has proposed additional import duties on China-made battery electric vehicles (BEV), ranging from 7,8% for Tesla to 35,3% for SAIC’s MG. With 1 in 5 electric cars sold in Europe last year imported from China, the aim is to level the playing field as European carmakers ramp up their EV offering. The preliminary tariffs have been in force for 2 months, and are set to be confirmed by member states by the end of October. What’s their impact? And what’s next for Europe’s EV trade policy?

The initial results for the EU market are mixed:

MG has seen the largest drop in BEV sales in the last few months, with its market share falling from 4.1% of the EU BEV market in August 2023 to 2.4% in August 2024. This is a 41% decrease in market share.
BEV imports by BYD continue to grow. Compared to 1.6% of the EU BEV market in August 2023, it reached 2.9% market share in August 2024, a 81% growth in market share.
The impact on Geely is somewhere in between. From 1.3% in August 2023, Geely still increased its market share by 58% to 2% in August 2024.

Given these initial trends and the expected sales by GlobalData, T&E has updated its China-made BEV imports forecast to 2027.

We predict the China-made imports to peak this year, and then to slowly reduce to 20% in 2025 and around 18% of BEV sales by 2026. While imports of many Chinese brands will grow slower, some of it will be replaced by local production (notably for BYD).

While tariffs are slowing some growth in imports, they are not stopping the ascent of Chinese EV makers, who have high quality and more affordable offerings. The problem is that European mass automakers have been slow to counter that: affordable BEVs are only coming now to coincide with the 2025 car CO₂ target.

In tandem with the 2025–2035 car CO₂ targets, higher EV tariffs make sense as an important part of a coherent industrial policy as more European EV models hit the market. However, if as EU carmakers demand, EU CO₂ targets are weakened, tariffs would deprive customers of choice whilst domestic manufacturers continue to sell ICE vehicles. T&E estimates that the China-made EVs will account for 27% (or close to a third) of all BEVs available to European drivers in the scenario where the 2025 target is delayed and the current EU EV sales continue stagnating as a result.

But the EU should not stop at EVs. Many homegrown battery makers have experienced delays and setbacks in the last few months, driven by global market dynamics of cheap high quality Chinese batteries. Having poured dozens of billions into homegrown battery makers, it makes no sense to have the lowest battery tariff globally, at just above 1%.

If action is not taken, T&E estimates that just 10% of the currently announced battery gigafactory plans (apart from those operating already) are likely to go ahead. An overwhelming 60% is under risk and would likely be scrapped leading to a loss of billions of investment and close to 100k potential jobs.

T&E recommends

Confirming the additional EV import duties alongside the 2025 Car CO₂ target.
Launching an investigation into battery cells to enable trade defence measures.
Launching the EU Battery Fund and agreeing battery carbon footprint provisions without delay to reward clean local manufacturing.

FULL ANALYSIS

Courtesy: Transport & Environment