Tariff Reduction Offers Boost to Tesla
The European Union slashes tariffs on Tesla China-made cars, marking a pivotal moment for the electric carmaker’s prospects in the European market. This new development comes in the wake of the EU’s recent move to increase tariffs on all electric vehicles (EVs) imported from China, which was driven by concerns over “unfair” state subsidies favoring Chinese electric vehicle manufacturers over their European counterparts.
Initially, the EU had set a tariff rate of 20.8% on Tesla’s China-made vehicles. However, with the European Union slashes tariffs on Tesla China-made cars to a more favorable 9%, the rate has been significantly reduced. This revised tariff is applied in addition to the existing EU duty of 10% on all electric vehicle imports. While this new rate remains lower compared to the 17% to 36.3% tariffs imposed on other Chinese automakers, it reflects the level of subsidies Tesla received in China.
Competitive Implications and Reactions
The adjusted tariff rate is expected to provide Tesla with a competitive edge over other Chinese electric car manufacturers in Europe. Gregor Sebastian, a senior analyst at Rhodium Group, expressed surprise at the relatively modest 9% additional tariff imposed on Tesla, given the financial support the company has received from local governments and battery suppliers in China. Sebastian noted that while the reduced tariff is beneficial for Tesla, it still represents a challenge compared to rivals like SAIC, which faces a hefty additional tariff of 36.3%.
In contrast, other Chinese manufacturers have been subject to varying additional tariffs. Geely, which owns Volvo, faces an extra 19.3% tariff, while BYD, a major competitor to Tesla in the global EV market, is subject to a 17% tariff. These rates are slightly lower than those proposed earlier in June following a detailed investigation by the European Commission.
Broader Market Impact and Chinese Response
China’s Commerce Ministry has expressed strong opposition to the EU’s tariff decision, criticizing the investigation findings as distorted and pledging to protect the interests of Chinese companies. Despite the increased duties, Despite the European Union slashes tariffs on Tesla China-made cars, Chinese automakers are unlikely to retreat from the European market, which remains a crucial destination for their exports.
Tesla’s recent tariff reduction is likely to help maintain its competitive position against other Chinese-made EVs in Europe. While Tesla previously increased the price of its Model 3 in response to the initial tariffs, the new lower additional tariff is expected to keep the Model 3 competitively priced compared to the BYD Seal. Industry analysts suggest that BYD, with its lower production costs and potential to increase exports of plug-in hybrid vehicles, is well-positioned to absorb higher tariffs or adapt its strategy by potentially manufacturing vehicles in Turkey to avoid tariffs.
Overall, the new tariff structure presents both opportunities and challenges for Chinese EV makers in Europe, a market that accounted for over a third of their exports last year, reflecting its importance in the global automotive landscape.
