Despite the European Union's impending decision on imposing higher tariffs on Chinese electric vehicles (EVs), Chinese automakers remain resolute in their commitment to the European market. This determination was reiterated by Cui Dongshu, Secretary General of the China Passenger Car Association (CPCA), who stated on Tuesday that Chinese enterprises would continue their development and integration into European markets regardless of the EU's anti-subsidy probe into Chinese-made EVs.
The European Union alleges that Chinese automakers benefit unfairly from state subsidies and accuses them of dumping excess production on Europe-a charge Beijing firmly denies. The EU is expected to announce the new tariffs this week, a move that could provoke retaliatory measures from China.
"The traditional carmaking industry plays a big part in generating employment in Europe," said Cui. "Chinese firms won't take aggressive measures or low-pricing moves to disrupt the stability of employment in Europe."
Data from the CPCA showed a rare drop in Chinese car exports for May, with new energy vehicle (NEV) exports, including electric cars and plug-in hybrids, falling by 4% year-on-year and 18.8% from the previous month. Overall passenger vehicle exports declined by 9% from a record high in April to 378,000 vehicles in May.
"Export growth didn't meet our expectations," admitted Cui. Domestic vehicle sales also saw a decline, with a 2.2% drop following a 5.8% decrease in April, indicating entrenched weak demand in the world's largest auto market amidst a sputtering economy.
The EU's standard duty on imported EVs currently stands at 10%, but it is set to be provisionally raised to between 25% and 30%. Some analysts, however, predict it could climb as high as 50%. Citi analysts have suggested a 40% probability of a tariff rate hike to 30-50%. Anthony Sassine, a senior investment strategist at KraneShares, expects the tariffs to be between 10% and 20%, possibly reaching the higher end of this range following the recent European Parliament elections.
Ursula von der Leyen, President of the European Commission, has advocated for a "de-risking" approach from Beijing. The European Commission launched an investigation in October into subsidies given to Chinese EV makers, alleging that such subsidized imports posed an economic threat to the EU's EV industry.
"Chinese manufacturers are so efficient and ahead of the curve that tariffs like this-I don't think will impact too much the pricing here. They will still be more competitive than their EU counterparts," Sassine told CNBC's "Squawk Box Asia" on Tuesday.
China's EV industry has flourished thanks to significant incentives and support from the Chinese government, raising overcapacity concerns in the U.S. and Europe. In response, the Biden administration in the U.S. has hiked tariffs on Chinese EV imports to 100%, up from 25%, while Turkey announced a 40% additional tariff on imports of vehicles from China.
Despite these challenges, Chinese EV makers are expanding their presence in Europe. Last month, companies such as Xpeng and BYD showcased their models in Europe, while Nio opened a new showroom in Amsterdam. BYD announced plans to build a new factory in Hungary, and Chery entered a joint venture with Spain's Ebro-EV Motors to develop new EVs.
"Scores of Chinese manufacturers are now scouting the EU," said Cedomir Nestorovic, a professor of geopolitics at ESSEC Business School. "They will avoid, or they will try to avoid, all kinds of tariffs."
Chinese automakers are setting up factories in Europe to mitigate the impact of tariffs. Nio, for instance, is considering Hungary as a location for its operations. "I think with Europe, it's not going to be a big deal. In the U.S., it's a different story," Sassine added.
