European carmakers will lose market share of battery electric vehicle (BEV) sales in Europe to Chinese-owned competitors unless the EU imposes planned CO2 targets alongside tariffs, according to lobby group Transport & Environment (T&E).
The European Commission announced today that it will go ahead with provisional tariffs on Chinese-made EVs.
T&E forecasts that imports of Chinese-owned brands will account for over 12pc of the EU BEV market this year, up from 8pc last year, while imports of non-Chinese brands will edge up to 13pc from 12pc (see graph). And if the EU does not impose its planned reduction targets on CO2 emissions, imports of Chinese-owned brands of BEVs are set to rise to almost 15pc, while non-Chinese brands will continue to hover at around 13pc.
The EU's CO2 target sets out that all carmakers must achieve net zero CO2 emissions by 2035 across each fleet of sales, with milestones in place before 2035, starting next year. But the legislation has been under scrutiny lately, which has prompted pushback from a number of firms seeking stability.
"The path to 2035, including specific CO2 milestones, was established in 2014 and 2019," Paris-based charging start-up Electra's chief executive Aurelien De Meaux said. "We rely on this stability to make informed and effective investments and ask the legislator to not change the rules during the game."
The rising market share of Chinese-owned BEV brands would be tempered if the EU maintained its CO2 targets, according to T&E, as European firms would be incentivised to focus on selling affordable BEVs to hit carbon neutral targets instead of focusing on selling more profitable internal combustion engine models.
A separate analysis by consultancy Rhodium Group found that the profit margins of Chinese-owned brands when imported to Germany will still largely exceed the cost of the EU's newly proposed tariffs, suggesting that tariffs alone are insufficient to protect western EV makers (see graph).
And imported models from western carmakers Tesla and BMW, occupying the bottom three bars of the graph, are all set to become unprofitable once tariffs are imposed, illustrating that the EU's tariffs may do more harm than good to western carmakers with plants in China, such as BMW.
In response, China has considered imposing retaliatory tariffs on other goods.
Chinese carmakers have also mulled the possibility of building EV plants overseas (see graph). Since 2022, 11 plants in the EU have been planned, although only three have passed the planning phase, owing to the uncertainty over tariffs from the EU. Chinese-owned plants planned elsewhere have been more successful at reaching the construction phase.
The market is similarly unclear on battery production, according to T&E, with 59pc of announced production capacity "less likely" to go ahead by 2030. T&E deems a further 10pc "more likely", with 15pc currently under construction and just 17pc of announced capacity currently operating.
