After months of investigation, the European Union has announced additional tariffs on electric vehicles (EV) imported from China, because of what it sees as Beijing's unfair support for companies that undercut European carmakers.
The decision deals a blow to the Chinese government, which had been lobbying hard against the taxes, and EV producers in the country. Most companies are facing hefty extra tariffs of between 17.4% and 38.1%, on top of the 10% duty already levied by the bloc.
The impact on China's EV makers will vary depending on the level of tariff and each company's cost structure. Those hardest hit may be forced to raise prices or set up factories in Europe.
And while Beijing is clearly unhappy, analysts say it's unlikely to want to rush into a full-blown trade war with its second biggest trading partner, not least because of economic pressures at home.
For market leader BYD, which vies with Tesla as the world's top producer of battery electric vehicles, there's still space for it to grow in Europe, even with the additional duty, according to Gregor Sebastian, a senior analyst with the Rhodium Group.
Facing the lowest additional levy of 17.4%, BYD could emerge as a relative "winner," he said. Duties at this level could even allow BYD to cut its already competitive prices to gain market share in Europe.
"BYD is already building a factory in Europe, is likely to still profitably export to the EU even with 17% duties, and can export plug-in hybrids without additional duties," Sebastian said. The new tariffs only target battery EVs.
Rhodium said in April that BYD's European profits are 45% higher than in China, meaning that market will still remain highly attractive even after the new tariffs are imposed.
Europe is key to Beijing's EV ambitions. It overtook Asia as China's largest EV export market in 2021. That helped propel China into pole position as the world's No 1 car exporter.
"One critical issue for China is that the EU accounted for 38% of China's EV exports in 2023," Sebastian said. "China will not be able to reroute exports to other countries as potential alternatives like Brazil, Turkey and the US have also pulled up drawbridges."
Last month, the United States quadrupled tariffs on EVs from China, from 25% to 100%, aiming to boost American jobs and manufacturing.
"The EU is the only market left that is both wealthy and large enough to absorb a meaningful amount of China's excess production of EVs," said Etienne Soula, a research analyst with Alliance for Securing Democracy at the German Marshall Fund of the United States.
The Chinese government has big dreams for the country's EV industry, part of a broader strategy to surpass America in the global tech race.
It's also trying to counter a property-induced economic slowdown and promote a low-carbon economy. EVs, along with photovoltaics and lithium-ion batteries, are seen by the government as the "new three" growth drivers that will play a pivotal role in shaping the country's economic landscape.
In February, nine government agencies, including the Commerce Ministry and the central bank, vowed to provide support to accelerate Chinese EV makers' global push.
Keep reading about the implications of the tariffs.
More on the rise of China's EV industry:
