The European Union (EU) is currently in the midst of important strategic decisions that will affect the future of its trade in batteries and electric vehicles. Transport & Environment’s (T&E) latest report analyzes the impact of the recently imposed provisional tariffs on electric vehicles produced in China and examines the future of European investment in gigafactories.
As part of an anti-subsidy investigation, the European Commission proposed additional import duties on battery electric vehicles (BEVs) manufactured in China, ranging from 7.8 percent for Teslas to 35.3 percent on SAIC’s MG. With one in five electric vehicles sold in Europe last year coming from China, the aim of this measure is to level the playing field for European automobile manufacturers who are in the process of expanding their EV portfolio.
The provisional tariffs have been in place for nearly two months, and the EU member states will decide whether to fully adopt them by the end of October. What effect have they had so far?
Despite the tariffs, Chinese EVs are becoming increasingly popular thanks to their high quality and affordable prices. Meanwhile, European mass-market manufacturers have been sluggish and will not be able to offer affordable EVs en masse for a few more years.
Transport & Environment predicts that BEV imports from China will peak this year before falling to 20 percent of European BEV sales in 2025 and about 18 percent in 2026. While some Chinese brands may see slower growth, it is expected that a part of the import volume, especially that of BYD, will be replaced by local production.
However, one key issue will remain: The tariffs may slow the growth of imports, but they will not stop the rise of Chinese manufacturers. When it comes to offering affordable EVs, European automobile manufacturers are lagging behind. 2025 will be an important year, as the new CO2 targets for cars will come into effect across the EU. T&E recommends that the additional tariffs and 2025 CO2 targets be maintained as part of a coherent industrial policy. However, if the CO2 targets are lowered, as many EU manufacturers are calling for, the tariffs could limit European consumer choice while strengthening the market share of internal combustion engine vehicles.
Not only the EV industry, but also the European battery industry is feeling the squeeze. Competition from China’s low-cost, high-quality batteries is causing several announced battery gigafactories to stall. Despite massive investment in local manufacturing, EU tariffs on batteries are the lowest in the world at just over one percent.
T&E estimates that only 10 percent of the announced European battery factories will actually be built if no further action is taken. About 60 percent of the planned investments are at risk of being canceled, which would result in the loss of billions in investment and around 100,000 potential jobs.
For more information and detailed analyses, read Transport & Environment’s full report .