Why did Chinese car companies “celebrate” the extension of duties by the EU on the stock exchange? Because they actually get penalized relatively, much less than the United States did
After seeing the reaction of investors, experts have few doubts: it will not be the duties announced by the European Union that will damage Chinese car imports. This was clear from how the markets moved.
In the aftermath of the Commission’s announcement of three-level tariffs (17.4% for BYD, 20% for Geely up to 38.1% for SAIC), depending on the degree of cooperation in the state aid investigation conducted from Brussels, the stocks of Beijing’s car manufacturers instead of going down they shot upwards.
Byd was the best with 5.82%, Geely with 1.69%, Li Auto with 1.99%, Leapmotor with 2.66%. Only Xpeng (-1.53%) and Saic (-1.55%) were negative.
In reverse, European titles, especially from groups that produce or have a sales network in China (from Volvo to Porsche, from Volkswagen to Renault) have accumulated losses between 2 and 6%. Investors think EU tariffs will not hurt Chinese car sales
Investors think EU tariffs will not hurt Chinese car sales
For what reason? According to analysts it is very clear: the EU move was «modest compared to the 100% tariffs on imports of Chinese e-cars into the United Statesquadrupled from 25% in May», we read in the Morningstar report. For Citi analysts land additional EU tariffs are not enough to put the sector in crisis.
In essence, the competitive advantage of Chinese cars remains such that prices are still advantageous compared to similar European models. It is better for Chinese companies to earn less but continue in the policy of market penetration of the European Union, decisively moving towards the electricity transition.
Furthermore, President Xi does not want to start a new trade war against the West. A clash that even Brussels has made clear it wants to avoid. And how? Because at the same time as the tariffs were announced, the Commission sent a message to Beijing to discuss how to prevent duties from becoming “effective”.
We will have to wait until November before they become operational. There is plenty of time to find an agreement in which, for example, Beijing pledges to end its trade dumping policies.
At a time when world trade is slowed down by two wars and the Beijing government is struggling with one real estate crisis which still needs time to be reabsorbed, there is no need to further amplify the economic conflict with the West.
Beijing companies can get around tariffs by building factories in EU countries
But the Chinese also have other ways to circumvent the duties. The additional tariffs apply to imported cars, not those that are produced in Europe. It is not for nothing that Chinese companies are trying to increase alliances with European partners (this is the case of Stellantis with Leapmotor) or they think of open factories in EU countries.
And this is why European producers criticized Brussels’ decision. Starting from Acea, the European manufacturers’ association. Along the same lines Carlos TavaresCEO of Stellantis who said at the Investor Day in Detroit that “we don’t want to be on the defensive, we have to go on the attack and ride the wave of the Chinese offensive“.
What does the Portuguese manager mean with these words? The explanation can be found in some reports which underline how Chinese companies could decide to attack the markets of emerging economies ahead of time. Especially where they have already established commercial relationships in competition with the West
The result, as the Financial Times wrote in a long report, “will lead to Chinese rule in the most important ones emerging markets of the worldincluding Southeast Asia, Latin America and the Middle East, and in remaining Western economies that are less protectionist than the United States and Europe“.
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