Europe Looks to Forge Deal with Chinese EV Manufacturers to Avoid Tariffs

Europe's Change of Heart

It appears that the European Union (EU) is reconsidering its stance on Chinese electric vehicle (EV) manufacturers doing business in Europe. Previously, the EU had considered imposing heavy tariffs on Chinese firms, accusing them of disrupting the European market with an oversupply of goods and reduced prices.

Exploring Alternatives to Tariffs

According to a recent report from Bloomberg, the EU is now dispatching officials to Beijing to discuss alternatives to tariffs on Chinese electric vehicles. The two sides are reportedly considering a "price undertakings" agreement, which would regulate export prices and volumes as an alternative to tariffs.

Challenges in Negotiations

Despite eight rounds of talks, the proposals on the table are still not meeting EU standards, including compliance with World Trade Organization rules and enforceability requirements. However, recent discussions have seen progress, with potential simplifications of terms for price undertakings, particularly for new EV models not yet exported. A key focus is preventing cross-compensation, where EV pricing deals might be offset by sales of hybrids or other goods.

China's Single Umbrella Deal

One of the hurdles in the negotiations is China's insistence on a single umbrella deal for all manufacturers. This agreement would be managed by a national trade group representing key exporters, such as SAIC Motor and BMW Brilliance.

Chinese EV Makers' Strong Performance

Despite the ongoing negotiations, Chinese EV manufacturers have been performing well. Major EV makers in China ended the third quarter stronger than the previous year, with robust deliveries reducing the need for discounts. Analysts anticipate a sales surge in the fourth quarter, driven by increased subsidies and Tesla's best Chinese quarter. In September, EVs and hybrids accounted for about 53% of new car sales.

Government Support Boosts Sales

Chinese EV sales are projected to increase further following a recent directive for government agencies to buy more new energy vehicles. Companies like Zhejiang Leapmotor, Nio, and Zeekr are flourishing through major deals and brand expansions. Top-sellers BYD and Geely are on track to meet their ambitious sales targets of 4 million and 2 million, respectively.

Optimistic Outlook

Yale Zhang, managing director at Shanghai-based consultancy AutoForesight, expressed optimism about the current state of the market. He commented, "I do not see a need to launch another price war. Most of them are in pretty good shape. The majority of these NEV or carmakers will reach their volumes.”

Bottom Line

The ongoing negotiations between the EU and China over tariffs on electric vehicles highlight the complexities of international trade. While the EU seeks to protect its market, it also recognizes the value that Chinese EV manufacturers bring in terms of supply and pricing. It's a delicate balancing act, and the outcome will have significant implications for the global EV market. What are your thoughts on this development? Feel free to share this article with your friends and discuss. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.