Chinese EV Makers Surge Despite EU Tariff Decision

EU Imposes Additional Tariffs on Chinese EVs, BYD Shares Surge

On June 13, 2024, shares of Chinese electric vehicle (EV) makers experienced a surge following the European Union's announcement of higher tariffs on Chinese EVs, up to 38%. BYD, a leading Chinese EV manufacturer, saw its shares rise by 8% initially, settling around 6% later in the day.

Key Takeaways

• EU imposes up to 38% additional tariffs on Chinese EVs, impacting BYD, Geely, and SAIC.
• BYD shares surged 8% initially, while Geely and Li Auto saw moderate gains.
• Tariffs are seen as "modest" compared to U.S. hikes, not derailing China's EV recovery.
• China may retaliate but not escalate, focusing on "contained retaliation" against EU measures.
• Setting up local factories in Europe could be a long-term solution for Chinese EV manufacturers.

Analysis

The EU's imposition of up to 38% tariffs on Chinese EVs, aimed at curbing alleged unfair subsidies, has sparked a mixed market response. BYD and other Chinese EV makers initially saw stock surges, reflecting investor confidence in their resilience. However, SAIC's decline suggests sector-specific vulnerabilities. The tariffs, though significant, are viewed as less severe than previous U.S. measures, indicating a manageable impact on China's EV sector. Potential Chinese retaliation, likely to be measured, could include targeted tariffs or regulatory adjustments, aiming to balance economic interests without escalating tensions. Long-term, Chinese EV manufacturers may explore local EU production to circumvent tariffs and strengthen market presence.

Did You Know?

• BYD DM-i Electric Car: BYD, a leading Chinese electric vehicle manufacturer, introduced the DM-i, a model known for its advanced hybrid technology that combines an electric motor with an internal combustion engine. The "DM" stands for "Dual Mode," indicating its capability to operate in both electric and hybrid modes, enhancing efficiency and reducing emissions.
• Provisional Tariffs: These are temporary tariffs imposed by one country on imports from another as a protective measure while investigating potential unfair trade practices. They are typically subject to review and can become permanent if a resolution is not reached between the involved parties.
• Economic Injury: In trade disputes, this term refers to the harm caused to domestic industries by foreign competitors who may be benefiting from subsidies or other unfair advantages. The EU's claim of "economic injury" by Chinese EV makers is based on the belief that these subsidies distort the market and harm EU-based manufacturers.