Chinese electric vehicle companies find a way to avoid EU tariffs

Just over a month after the European Union’s high import tariffs on electric vehicles came into force, Chinese automakers are already testing the limits of the system by switching to hybrid vehicles.

EU tariffs The measures aimed at Chinese electric vehicle makers do not apply to hybrid cars – vehicles that run on a combination of gasoline and electricity.

That has prompted Chinese automakers such as BYD, Geely and SAIC to increase exports of hybrid vehicles to Europe and plan more models for the key market.

Also on AF: General Motors’ operations in China suffer a $5 billion hit

In the third quarter, exports of plug-in hybrids and conventional hybrids accounted for 18% of China’s total vehicle sales to Europe. That was double its share of 9% in the first quarter.

The share of electric vehicle deliveries fell to 58% from 62% in the same period.

“The increase is due to Chinese OEMs switching to PHEVs (plug-in hybrids) to avoid new EU tariffs on BEV (battery electric vehicles) imports from China,” said Murtuza Ali, analyst at Counterpoint Research.

He expects China’s hybrid exports to Europe to grow by 20% this year and even faster next year.

New launches, production shifts

The trend could see Chinese automakers upend the European plug-in hybrid market as they meet rising demand for affordable cars with better fuel consumption amid rising inflation. So far, European and Japanese companies have dominated the market.

China’s largest electric vehicle manufacturer BYD, for example, is competing against Volkswagen and Toyota in Europe with its first plug-in hybrid model, the Seal U DM-i.

The model is priced at 35,900 euros ($37,700), 700 euros lower than VW’s best-selling Tiguan PHEV model and 10% cheaper than Toyota’s C-HR PHEV.

Meanwhile, Geely, China’s second-largest automaker by sales, launched a new plug-in hybrid under its Lynk & Co brand for Europe last month.

The state-owned company SAIC, whose exports of electric vehicles to the EU have the highest additional rate at 35.3%, has also announced that it is planning products with different drive systems for the European market.

Some manufacturers are also moving production and assembly to Europe to reduce costs related to tariffs.

BYD is considering producing both electric and hybrid vehicles at its Hungarian factory, official Chinese media China Auto News reported.

Growing popularity

Hybrid cars are growing in popularity around the world as buyers see them as an affordable compromise between pure combustion and pure electric vehicles.

In China, hybrid cars have driven sales for the country’s leading electric vehicle makers reach record highs this year.

Hybrid exports to Europe also more than tripled from July to October compared to the same period last year and amounted to 65,800 units. This reversed the trend of declining sales through the beginning of this year and into 2023, according to the China Passenger Car Association.

“The recent increasing adoption of electrified hybrid models in markets around the world by global automakers is in line with consumer demands and purchasing trends,” automaker Geely told Reuters.

Yale Zhang, managing director of Automotive Foresight, said: “The segment could see greater growth potential if Chinese automakers bring more affordable options to Europe that are attractive to cost-conscious consumers.”

But experts warn that Chinese companies will tread more cautiously, fearing another round of EU tariffs, as the levies were part of a larger push by the bloc to stem the flow of cheap Chinese products.

“If BYD brings Qin Plus to Europe at a price of 20,000 euros, it would definitely trigger another earthquake,” said Zhang, referring to the carmaker’s hybrid sedan Launched earlier this year.

• Reuters, with additional editing by Vishakha Saxena

Also read:

China calls on BYD and Geely to “stop EU investments” once tariffs are imposed

China sues EU over electric vehicle tariffs, but trade war unlikely

EU warns: “China must adapt” to resolve trade disputes

EU supports high tariffs on Chinese electric vehicles, but talks continue

Tariffs on Chinese electric vehicles will accelerate factory closures in EU: Tavares

Stellantis CEO calls China’s electric vehicle tariffs a ‘trap’. He could be right

Chinese electric car companies scale back European plans due to subsidy review

European farmers fear a trade war with China over electric vehicle tariffs

China’s BYD welcomes opening of electric vehicle factory in France: minister

As the EU imposes tariffs, European countries are hunting down Chinese electric car factories

BYD promises a range of over 2000 km with new hybrid technology

EU could demand clean technology expertise from China in return for subsidies – FT

Vishakha Saxena

Vishakha Saxena is a multimedia and social media editor at Asia Financial. She has been working as a digital journalist since 2013 and is an experienced author and multimedia producer. As a trader and investor, she is particularly interested in the new economy, emerging markets and the interface between finance and society. You can write to her at (email protected)