The Impact of EU Tariffs on Chinese Electric Vehicle Makers

The news of the European Union imposing higher tariffs of up to 38% on Chinese electric vehicles (EVs) has had a significant impact on the stock market, particularly for EV companies. On the morning following the announcement, shares of Chinese EV makers saw a surge in value. Hong Kong’s Hang Seng index rose by 1.23%, driven primarily by gains in EV stocks. Companies like BYD, Geely, Nio, and Li Auto all saw an increase in their share prices, with BYD being the top gainer with an 8% jump in morning trade. However, state-backed SAIC experienced a decline of more than 2% in response to the news.

The EU’s decision to impose additional tariffs on Chinese EV players with a significant presence in Europe has been met with mixed reactions from the market. BYD will face extra tariffs of 17.4%, while Geely will be subjected to an additional 20% duty. SAIC, on the other hand, will have to pay the highest among the three, with additional duties of 38.1%. In addition to the new tariffs, these companies will still have to deal with the standard 10% duty already in place for imported EVs. The EU’s investigation into Chinese EV makers found that they benefited from “unfair subsidization,” which posed a threat of economic injury to the EU’s EV industry. As a result, the commission decided to impose these tariffs in an effort to level the playing field.

It is worth noting that the EU tariffs on Chinese EVs are seen as more modest compared to the tariffs imposed by the United States. While the EU’s duties range from 17.4% to 38.1%, the US has implemented stiff tariffs of 100% on Chinese EV imports, recently increased from 25% by the Biden administration. Despite the differences in tariff rates, the market expected the EU tariffs to be around 20%-25%, making the actual figures in line with expectations. According to Vincent Sun, an equity analyst at Morningstar, the EU’s move comes after a probe initiated in October and is meant to address what the commission sees as unfair practices in the industry.

The implications of the EU tariffs on Chinese EV firms could be significant, especially for those heavily reliant on European markets. Companies that cooperated in the investigation but were not sampled will face 21% in extra tariffs, while those that did not cooperate will face the highest rate of 38.1%. The commission has made it clear that these duties are provisional and will only become definitive if discussions with Chinese authorities do not yield a resolution by July 4. In the meantime, Chinese state-backed SAIC has been singled out for having the maximum tariff rate, prompting speculation that the EU is pressuring the company to establish a production facility within Europe to avoid further tariffs.

The EU’s decision to impose higher tariffs on Chinese EV makers has triggered a mix of reactions in the market. While some companies have seen their stock prices rise in response to the news, others have experienced a decline. The impact of these tariffs on the industry remains to be seen, but it is clear that the EU is taking steps to address what it perceives as unfair practices in the EV sector. As the situation continues to evolve, companies will need to adapt to the new regulatory environment and find ways to navigate the changing landscape of international trade.

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