The European Union may have given Tesla’s future sales in the region a boost by making tariffs on Chinese-made vehicles significantly lower than those for rival electric carmakers.
The striking decision comes two months after the EU increased rates on all electric cars imported from China, arguing that there are “unfair” state subsidies that unfairly favour the country’s electric vehicle manufacturers at the expense of European manufacturers.
Tesla, which has a factory near Berlin but exports many of its cars made in China to Europe, had asked the EU to recalculate the tariff, which was originally set at 20.8%.
On Tuesday, the European Commission, the EU’s executive arm, set that percentage at 9%.
That amount is on top of the existing 10% EU tariff on all electric car imports, but is still well below the additional 17% to 36.3% tariffs levied by other Chinese automakers.
The European Commission said the tariff reflected the “level of subsidy” Tesla received in China. “The Commission verified the information during (a) visit to China and carried out the same checks as with the other Chinese exporting producers in the sample,” it added in a statement. CNN has contacted Tesla for comment.
Gregor Sebastian, a senior analyst at think tank Rhodium Group, said he was “surprised” that Tesla’s additional rate was set at “only 9%.” He pointed to local government loans the company has received in Shanghai, as well as subsidized batteries from Chinese battery maker CATL.
“But it is difficult to make a strong argument here without seeing all the input and methodology that the Commission has used,” he added.
The additional tax is “still negative” for Tesla, but could give the automaker “some breathing room” against SAIC, currently its biggest competitor in Europe, he told CNN. “(SAIC) is really going to struggle.”
The Chinese state-owned carmaker, which owns the iconic MG brand, has been hit with an additional 36.3% tariff reserved for “non-cooperating companies”, the Commission said.
Geely, owner of Sweden’s Volvo, has been hit with an additional 19.3% tariff. And cars from BYD — which is competing with Tesla to become the world’s largest seller of battery EVs — are subject to an additional 17% tariff.
These amounts are slightly lower than the levies proposed in June following a more thorough investigation and input from car manufacturers, the Commission said.
Some Chinese companies entering into joint ventures with EU carmakers may also benefit from lower import duties (21.3%) instead of automatically receiving the higher rate of 36.3%.
Tesla vs BYD
After the first EU tariffs went into effect in July, Tesla raised the price of its Model 3 in Europe by about 4%, or €1,500 ($1,666), to €42,490 ($42,177). Tesla said the additional duties were to blame.
Still, the Model 3 remains cheaper than the BYD Seal, said George Whitcombe, an auto research analyst at consultancy Rho Motion. “With Tesla’s additional tariff being reduced … it will help the Model 3 remain competitive with other Chinese-made electric vehicles in Europe,” he told CNN.
BYD, on the other hand, has not yet increased prices in Europe, despite the significant additional import duties.
“BYD can absorb these additional tariffs much better because the production costs are much lower compared to their prices in Europe,” says Sebastian of Rhodium Group. He estimates that BYD could absorb an additional EU tariff of up to 45%.
The company could also ramp up exports of plug-in hybrid electric vehicles, which Tesla doesn’t make, since the tariffs only apply to battery EVs. And in the future, BYD could avoid tariffs altogether by making cars in Turkey for the EU market. Imports from Turkey aren’t subject to tariffs.
Despite the higher tariffs, Chinese electric carmakers are unlikely to give up on Europe. Last year, Europe accounted for more than a third of their exports, more than the next five largest markets combined, according to Citi.
Chinese carmakers enjoy a “huge margin” on their sales in Europe, Whitcombe said.
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