Prospects of Chinese electric vehicle market following EU tariff increase
China has become a global leader in the production and sales of new energy vehicles (NEVs) over the past few years. In 2023, it produced 9.58 million units and sold 9.49 million. The unprecedented expansion of Chinese EV manufacturers into global markets has raised significant concerns in the U.S. and the EU, leading these regions to impose higher tariffs on Chinese electric vehicles. Kazinform News Agency correspondent explores the production and sales prospects for Chinese NEVs amid intensifying trade competition among the world’s largest automotive players.
Escalating competition in global markets
In early October 2024, most European Union (EU) countries endorsed the European Commission’s decision to impose higher tariffs on Chinese-made electric vehicles, meaning that some Chinese automakers will face tariffs of up to 45% when importing NEVs into the EU market. China has quickly labeled this move as protectionist. Despite this, negotiations between the EU and China are ongoing, with both sides seeking alternative solutions.
Intensive negotiations are underway on price commitments, and some positive progress has been achieved in certain areas; however, there are still significant disagreements on issues of key interest to both Chinese and European business communities, noted Chinese Minister of Commerce Wang Wentao in a video conference with European Commission Vice-President Valdis Dombrovskis on October 25.
The concerns of major automakers in the U.S., EU, and developed countries in Northeast Asia are well-founded due to China’s growing production and export potential in the EV sector.
According to the China Association of Automobile Manufacturers (CAAM), China exported 4.91 million vehicles in 2023, with a sharp increase in NEV exports, which grew by 77.6% to over 1.2 million units. Exports of electric vehicles rose by 80.9%, and hybrids by 47.8% compared to 2022.
Liu Huaqin, Director of the Eurasia Institute at the Institute of International Trade and Economic Cooperation under China’s Ministry of Commerce, highlights that the EU’s additional tariffs on Chinese EVs are inconsistent with World Trade Organization (WTO) rules.
China’s advantage in EV production is based not on subsidies but on the scale of the industry, supply chain advantages, and market competition. The European Commission is unjustly using trade tools to hinder free trade in electric vehicles. This protectionist approach not only harms the legitimate rights and interests of China’s EV industry but also disrupts the supply chain within the global automotive network, including in the EU, increasing trade costs and harming consumer interests. For this reason, Spain, Germany, and Sweden called on the EU to revoke the additional tariffs imposed on Chinese EVs in September, Liu Huaqin told a Kazinform correspondent.
Earlier in September, China’s Ministry of Commerce stated that “the European Commission launched an anti-subsidy investigation without an official complaint from EU industry, and the decisions made were inappropriate, unjustified, and unfair”. China has called on the EU to resolve economic and trade differences through dialogue and consultations, reserving the right to take necessary measures to protect the legitimate rights and interests of its businesses.
Despite multiple rounds of China-EU consultations in September and October of this year, China’s Ministry of Commerce notes that “significant disagreements remain between the two sides, and an acceptable solution has yet to be found in the negotiations.”
In response, China’s retaliatory measures may extend beyond the European automotive industry, with potential anti-dumping investigations into other product categories. For example, China implemented anti-dumping measures on brandy imports from the EU starting October 11.
Chinese Minister of Commerce Wang Wentao and European Commission Vice-President Valdis Dombrovskis also exchanged views on the investigations regarding trade protection measures that China initiated for certain EU products, including brandy, pork, and dairy products.
These investigations were initiated at the request of national industries and are in full compliance with WTO rules and Chinese laws, stated the Chinese Ministry of Commerce.
China’s “new green trio”
On October 23 Chinese Foreign Ministry spokesperson Li Jian emphasized that China’s “new green trio”—electric vehicles, lithium-ion batteries, and solar panels—“is rapidly developing in an open competitive environment, forming advanced green production capabilities and contributing significantly to the global energy transition.”
“Protectionism, unilateralism, and politicization will only harm the collective interests of the international community,” the Chinese diplomat stressed when commenting on perspectives on China’s energy industry.
The International Energy Agency (IEA) recently released its annual “World Energy Outlook 2024” and “Renewables 2024” reports, which indicate that the global energy market is entering a China-led “electricity era” with China playing a leading role in the global development of electric vehicles.
Challenges and prospects for China’s auto industry
According to the China Association of Automobile Manufacturers, from January to July 2024, production and sales of new energy vehicles (NEVs) reached 5.914 million and 5.934 million units, respectively, reflecting annual growth rates of 28.8% and 31.1%. NEV sales in the domestic market during this period totaled 5.226 million units, a 34.3% increase. Sales are projected to hit 11.5 million units by the end of 2024. Additionally, Chinese NEV exports surpassed 700,000 units (+11.4%) from January to July.
At a briefing on October 23 in Beijing, Zhao Zhiguo, spokesperson for China’s Ministry of Industry and Information Technology (MIIT), stated that China’s auto industry maintained steady growth in the first three quarters of 2024, with NEV development also showing positive momentum.
In the first three quarters, production and sales of NEVs amounted to 8.316 million and 8.320 million units, respectively, marking a 31.7% and 32.5% year-over-year increase. NEV exports reached 928,000 units, up 12.5% compared to last year, Zhao noted.
However, Zhao acknowledged that China’s auto industry still faces challenges, including limited domestic purchasing power and increased uncertainty and instability in overseas exports. In response, the Chinese government will continue to implement measures to boost domestic auto consumption, including trade-in programs and favorable tax policies for vehicle purchases, including electric vehicles.
We will actively respond to trade barriers, such as anti-dumping investigations and higher tariffs, providing more support for auto companies to expand internationally, Zhao Zhiguo added.
According to Liu Huaqin, an expert at the Institute of International Trade and Economic Cooperation under China’s Ministry of Commerce, McKinsey forecasts that EV and electric motorcycle sales in five African countries—Kenya, Ethiopia, Nigeria, Uganda, and Rwanda—will reach between 340,000 and 820,000 by 2025, and grow to 3.8-4.9 million by 2040.
Liu also pointed out that the rapid development of China’s auto industry has raised global automotive standards, particularly in NEVs, which have become a model for environmentally friendly progress.
Many developing countries are looking to leverage China’s pricing advantage in EV production to strengthen their own industrial bases. According to the International Energy Agency, EV development is now a critical part of the Middle East’s green' transition, the Chinese expert emphasized.
She added that the Chinese auto industry plans to build a new export model that integrates the entire industrial chain, combining vehicles, technology, branding, batteries, and more, to expand exports and invest in overseas factories, creating localized auto production bases.
This will increase employment in target countries, drive modernization of the auto industry, enable more people to access affordable vehicles, and contribute positively to the development of global green transportation. The Chinese auto industry has broad prospects for further expansion into global markets, Liu Huaqin concluded.
For instance, leading Chinese NEV manufacturer BYD announced in December 2023 plans to build a new NEV plant in Hungary, scheduled to open in three years to serve the European market. The plant is expected to create new jobs and support Hungary’s green economy transition.
In addition to automakers, Chinese lithium-ion battery manufacturer CATL is also expanding its presence in the European market.
Previously, Kazinform News Agency reported that China has become the world leader in EV production and on how it addresses issues with aging vehicles in the country.
