Chinese automakers capitalize on a concealed loophole in European tariffs, escalating the trade dispute.

In the rapidly evolving automotive landscape, Chinese automakers are adapting their strategies to navigate the challenges posed by tariffs in the European Union (EU).

The EU has been imposing hefty tariffs on imported Electric Vehicles (EVs) from the People's Republic of China since October 2024. However, hybrids, being only partially covered by the EU's tariff system, offer a relatively safe avenue for import.

This has led Chinese automakers like BYD and Geely to shift their focus towards the production and import of hybrid vehicles in Europe. By doing so, they aim to bypass the immediate tariffs that the EU has imposed on EVs.

BYD, for instance, registered 20,000 plug-in hybrids in the EU through the first half of the year, marking a significant increase from the 6,000 PHEVs it imported during the whole of 2024. Similarly, Lynk & Co and MG are also importing more PHEVs to Europe than ever. MG, in particular, has imported more PHEVs across January-June than it did in all of 2024.

The EU tariff system applies higher tariffs to EVs than to plug-in hybrids, encouraging this shift in strategy by Chinese automakers. The plug-in hybrid BYD Seal U, for example, costs €3,999 ($4,600) in tariffs, compared to €10,000 ($11,600) for the EV version of the same model, the Atto 3.

SAIC, which sells MG models, has to deal with 45.3% EU tariffs on its imported EVs. However, the company has seen an increase in registrations for the hybrid MG HS, MG ZS, and MG 3, despite a 60% decrease in EV sales in Europe this year.

The European Commission is aware of this loophole and the Chinese brands exploiting it, but does not seem eager to close it. The Commission, however, is having talks with China's aggressively expanding automakers to address the issue.

Beatrix Keim, director of the Center Automotive Research in Germany, states that it was only a matter of time before Chinese manufacturers changed their strategy to increase profitability in Europe. The Commission remains hopeful it can work things out with these expanding automakers, ensuring a continued growth in the European EV market.

Toyota, while not specifically mentioned as blinking in response to the growing European EV market in the article, the title suggests it might be a relevant point to watch.

In conclusion, the EU tariff system has led Chinese automakers to focus on hybrids as a means to circumvent the tariffs on EVs, leading to an increase in the import of PHEVs to Europe. The European Commission, while aware of this loophole, seems to be in discussions with the Chinese automakers to address the issue. The future of the European EV market will likely be shaped by these negotiations.

Chinese automakers capitalize on a concealed loophole in European tariffs, escalating the trade dispute.