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EU tariffs solidify China's EV hierarchy



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The author is a Reuters Breakingviews columnist. The opinions expressed are her own. Updates to add graphic.

By Katrina Hamlin

HONG KONG, June 13 (Reuters Breakingviews) -The European Union's provisional tariffs against Chinese electric-car makers are helping to separate winners from losers.

Starting July, Chinese imports of battery-powered cars from the $92 billion BYD 002594.SZ, 1211.HK will face an additional 17.4% levy, while Geely Auto 0175.HK and SAIC Motor 600104.SS are subject to 20% and 38.1% respectively,on top of an existing 10% duty. The differences reflect the EU's conclusions that the companies enjoy different levels of state support, as well as taking into account which ones cooperated with inquiries.

Investors'response was mostly muted.During intraday trade on Thursday, BYD's Hong Kong listed shares gained some 2%, compared to their close on June 11, a day before early reports hinted at the inquiry’s outcome. Geely Auto shed around 3% while SAIC Motor fell roughly 1%. By contrast, Nio's 9866.HK stock was down 7.5% over the same period, and rival Xpeng 9868.HK sunk 6%.

One reason is that the levies were more lenient than feared. Analysts at JPMorgan expected Chinese automakers to end up with a 30% total levy; at 27.4%, they now reckon BYD's profitability per unit to be 1.5 times higher than the same car sold in China, compared to three to four times before.

Moreover, BYD has other strengths. The privately-owned company relies less on Beijing's support than state-backed rivals like SAIC, per the EU's findings. But it has blazed ahead in batteries, chips, buses and even hybrids that are not subject to the tariffs. The diversified business model helped it earn an early start in Europe's electric-vehicle market, winning Europe's first public tender for e-buses more than a decade ago.

BYD is also better able to find workarounds. It is, for example, already planning local production in Hungary, and mulling a second plant in the region too. SAIC and state-backed Chery are also eyeing setting up in Europe as well, Reuters reported on Monday. Smaller and less established brands like Nio and Xpeng would struggle to justify a similar move at this stage: their combined sales accounted for just 0.3% of battery electric vehicles sold in Western Europe in the first quarter, according to Schmidt Automotive Research.

Over the longer run, lower tariffs for BYD could help it consolidate its advantages over its compatriots. Analysts expect BYD's earnings to equal around 5% of the top line this year, versus less than 2% for SAIC, per Visible Alpha. The gap between BYD and the rest of the pack looks set to widen.

Follow @KatrinaHamlin on X

CONTEXT NEWS

The European Commission will provisionally apply duties on electric vehicles made in China and exported to the bloc, according to a press release on June 12.

The tariffs, which are in addition to current duties of 10%, will be set at 17.4% for BYD, 20% for Geely and 38.1% for state-backed SAIC. Other battery electric vehicles producers in China which cooperated in the investigation will be subject to a weighted average duty of 21%, while those which did not cooperate in the investigation will face duties of 38.1%.

The provisional duties can be implemented from July. A final decision on the duties will be made later in the year.

In intraday trade on June 13, Hong Kong listed shares in BYD rose

around 2% compared to their close on June 11, the last day before early reports on the provisional tariffs were published; shares in Geely Auto and SAIC Motor

fell around 3% and 1% respectively over the same period.



Graphic: EU tariffs on electric cars from China are varied https://reut.rs/4b0m6Kc


Editing by Robyn Mak and Aditya Sriwatsav

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