The EU is expected to unveil tariff plans for Chinese electric vehicles this week

TOPSHOT – People look at a BYD Seagull car from Chinese electric vehicle (EV) manufacturer BYD Auto at the Bangkok International Motor Show in Nonthaburi on March 27, 2024. (Photo by Lillian SUWANRUMPHA / AFP) (Photo by LILLIAN SUWANRUMPHA/AFP via Getty Images)

Lillian Suwanrumpha | Episode | Getty Images

The European Union is expected to unveil its tariff plan for Chinese electric vehicles this week, as the bloc cracks down on low-priced, subsidized imports.

The EU has a standard 10% excise tax on imported electric vehiclesbut will provisionally increase fees for Chinese electric vehicles from July 4.

Citi analysts said Monday that the rate could be “increased from 10% to ~25-30% currently, while our risk scenario (40% probability) projects a rate increase to 30-50%.”

Anthony Sassine, senior investment strategist at KraneShares, said on Tuesday he expects rates to be “between 10% and 20%” but “this could be on the upper end of 20%” after the European Parliament elections from last week.

Ursula von der Leyen, president of the European Commission, saw her party – the European People's Party – win seats on Sunday. Von der Leyen does Beijing has pushed for a “de-risking” approach.

Potential EU tariffs on Chinese electric vehicles won't have much impact, strategist says

The European Commission first started an investigation in October to subsidies for EV manufacturers in China. The EU claimed that such subsidized imports “posed an economic threat to the EU EV industry”.

“But the Chinese manufacturers are so efficient, so ahead of the curve, that tariffs like this – I don't think they will affect prices here too much. They will still be more competitive than their counterparts in the EU,” Sassine told CNBC. Squawk Box Asia” on Tuesday.

China's EV industry has boomed thanks to incentives and support from the Chinese government, raising concerns about overcapacity among authorities in the US and Europe.

US Energy Secretary Jennifer Granholm warned in March that China could flood the US electric vehicle market with its supply, after President Joe Biden raised similar concerns. The US announced tough new tariffs in May. The Biden administration has increased tariffs on Chinese EV imports from 25% to 100%.

Turkey Reportedly announced on June 8 that it will impose an additional 40% tariff on vehicle imports from China.

Expansion in Europe

Last month, Chinese EV makers including Xpeng and BYD showed their models in Europe while Nio opened a new showroom in Amsterdam, despite the ongoing EU investigation.

BYD announced in December that this will be the case construction of a new factory in Hungary while Chery in April entered into a joint venture with the Spanish Ebro-EV Motors to develop new electric vehicles.

Cedomir Nestorovic, professor of geopolitics at ESSEC Business School, said that “dozens of Chinese manufacturers are now exploring the EU.”

They “will avoid, or try to avoid, all kinds of tariffs,” Nestorovic told CNBC's “Street Signs Asia” on Monday.

Chinese EV manufacturers are now 'exploring' the EU, says professor

'We see that Chinese car manufacturers are actually setting up factories in Europe. Nio is also looking at Hungary. So there are options here, and I'm sure there are backchannels happening here,” said KraneShares' Sassine.

“I don't think it will be a problem with Europe. In the US it's a different story,” Sassine said.

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