The European Commission has announced additional tariffs of up to 38.1% on imports of Chinese electric vehicles (EVs), aiming to eliminate what it calls \"invasive species\" from its market. However, this move could have significant repercussions for Europe's own automotive industry.
European carmakers have increasingly relied on China-dominated supply chains, investing heavily in production facilities within China to leverage the country's technological advancements and cost efficiencies. For instance, Germany's premium automaker BMW manufactures its iX3 electric SUV in a Chinese factory before exporting it to Europe. Additionally, BMW imports large quantities of China-made Mini EVs into the European market. The newly imposed EU tariffs mean that these European manufacturers will have to absorb extra costs, potentially impacting their competitiveness.
Oliver Zipse, CEO of BMW, criticized the decision as the \"wrong way\" to approach international competition, warning that \"protectionism risks starting a spiral: Tariffs lead to new tariffs, to isolation rather than cooperation.\" He emphasized that \"there will be no single car in the EU without components from China,\" highlighting the intertwined nature of global automotive supply chains.
The trade tensions could prove devastating for the EU, which remains dependent on Chinese supply chains. HSBC estimates that German carmakers derive up to 23% of their global profits from China. Moreover, China stands as the third largest market for EU vehicle exports, following the UK and the United States in 2022. For BMW, China accounted for nearly 32% of sales in the first quarter of this year. This dependency means that if China retaliates against the tariffs, the EU's vehicle exports to China could be significantly affected.
As European automakers vie for a competitive edge in Chinese EV factories, they also export high-value models to the Chinese market. The EU's tariff decision may undermine these efforts, making it a critical issue for the future of international trade and the global automotive industry.
Reference(s):
cgtn.com
