EU tariffs on Chinese EVs will slow price drops – experts

VILNIUS – As the European Union increase tariffs on Chinese-made electric cars, Lithuanian experts and business representatives say this will slow the drop in the prices of such vehicles in Lithuania and Europe.

The higher tariffs will slow down the market consolidation of Chinese EVs in Europe and give European manufacturers more opportunities to compete with the Chinese, the experts say.

Tadas Povilauskas, the chief economist at SEB Bank, says the EU decision will make Chinese cars more expensive in Europe and the resulting reduction in competition will slow the drop the price of EVs produced in Western Europe.

"Electric cars have basically now moved to a stage where they are becoming cheaper. Yes, their prices will not drop as they would have been without these additional import tariffs because those tariffs (for Chinese electric cars - BNS) stood at 10 percent before, but now, depending on the manufacturer, the tariffs are up to 35 percent and yes, this is slowing down the drop in their prices," Povilauskas told BNS.

In his words, the EU move was important to stop Chinese electric cars taking over the European electric car market at a very fast pace as European manufacturers are unable to compete with Chinese makers due to low labor costs in the Asian country.

Laurynas Bogucevicius, director of Deals on Wheels, a Lithuanian company selling electric cars, says that the market for Chinese electric cars in Lithuania is still very small.

"We have a very small amount of Chinese cars reaching Lithuania today, so this probably won't affect us in the near future. But we will probably feel it a bit later when the Chinese car market becomes important for us," he told BNS. 

Although Chinese cars are on average about 20 percent cheaper than those of made by Western European manufacturers, there's no one to repair them in Lithuania. However, he said, the first Chinese electric cars can already be spotted in Lithuania.

According to the Washington-based Peterson Institute for International Economics, imports of Chinese electric cars in Europe more than doubled last year to 437,700, compared to from 208,900 in 2021. Compared to 2020, when Chinese imports of EVs totaled 57,200, this figure has almost quadrupled. 

Meanwhile, exports of EVs from Europe to China in 2023 amounted to just 11,500, down 33.8 percent, from 17,347 EVs in 2022.

Povilauskas says that the car market is one of Europe's most important sources of finance, and maintaining it is crucial for all countries.

"The automotive industry is still one of the EU's core industries. Since China is somewhat ahead in terms of costs, in terms of production costs in this sector, and the European Union does not have that advantage at the moment, if we do not restrict (Chinese car imports - BNS) now, it is just a matter of time before this (European car - BNS) industry starts to decline more strongly," the economist explained.

He said that by imposing additional duties, Europe was giving domestic carmakers time to find ways to make their production more efficient and to compete more effectively with China.

However, the Deals on Wheels owner stressed that China is competing with European electric cars in ways that the EU cannot do itself.

"The Chinese government is in the game. For example, Volkswagen, Audi, Toyota or BMW support themselves with their own capital, just like any normal business. But China is not a very normal country in the sense that it is not a capitalist country," he explained.

"China has all sorts of tax incentives, and it also contributes with so-called bonuses, financial support, which immediately opens up the market for a new factory," Bogucevicius said.

Last week, the EU imposed additional duties on electric cars made in China of up to 35.3 percent.

Currently, electric cars imported from the country are subject to a 10 percent duty.

China has slammed the new duties as protectionist and warned that they will trigger a trade war.