The reason the overwhelming volume of imported EV's into Europe are BEV's is thanks to Tesla. That's right, the charts don't copy over from where I got it
China’s homegrown automakers havestarted to dominatethe domestic market and have been setting their sights on Europe. Concern about this impending influx has led the Europe to investigate whether subsidies have given the electric vehicles China is exporting anunfair pricing advantage.
While the probe may lead to increased tariffs, closing the gap in supply chain readiness, engineering expertise and technological innovation will take much more than just slapping bigger levies on China’s EVs.
Electric Vehicles Are Driving Up China's Auto Exports
China's passenger vehicle exports by drivetrain
Source: BloombergNEF, China Passenger Car Association, China Customs
Shipments of passenger EVs from China are rising quickly, reaching 476,000 units in the first half of this year. This was more than 38% of the country’s auto exports, a sharp increase from just 2% in 2019.
Chinese manufacturers including BYD, SAIC and Xpeng areacceleratingtheir move into Europe, while the likes of Tesla, Renault and BMW are also turning China factories intoexport hubs. Nearly half of those exports are destined for Europe.
With 10% tariffs on imported vehicles, Europe is by no means hugely inviting to China’s manufacturers. But it’s much more hospitable than the US, which jacked up its levies on Chinese carsto 27.5%during the Trump presidency. Moving closer to US policy could help ward off EVs that Europe would rather see built where they’re sold.
Existing tariffs, transport and other expenses already double the price of Chinese EV models sold in Europe. If higher levies are imposed, it could push Chinese carmakers to set up production in Europe. Another option could be to tap factories in Southeast Asia to circumvent higher tariffs. BYD, Great Wall and Hozon have all announced plans to establish new EV facilitiesin Thailand.
An even more important question is whether China’s EVs have gained cost advantages through subsidies. Incentives certainly have beeninstrumentalto the rise of China’s EVs. Beijing spent more than $26 billion in purchase subsidies for passenger EVs sold between 2016 and 2022, according to BNEF estimates. There were extra billions of dollars earmarked for research and development and key components, public procurement and buildout of charging infrastructure. Local governments also provide manufacturers with grants, low-interest loans, tax breaks and cheaper land.
China Hands Out $26 Billions to Electric Vehicle Buyers
National subsidies for electric passenger vehicles
Source: BloombergNEF, MarkLines, China's Ministry of Finance
But conventional subsidies alone don’t tell the whole story. The country also benefits from access to cheaper labor, energy and capital. Moreover, efficiencies of scale, vertically integrated ecosystems and a huge domestic market are playing important roles in reducing manufacturing costs. Those factors provide China’s manufacturers with advantages far beyond subsidies.
BNEF estimates that making a compact battery electric car in China costs roughly $15,000 today, excluding overhead, distribution, margins and any subsidies. This is about 65% of the direct manufacturing cost for a similar-size EV in Europe.
As for batteries — the biggest cost factor in EVs — BNEF’s 2022Lithium-Ion Battery Price Surveyfound that pack prices were 33% higher in Europe than in China, and 24% higher in the US.
Consequently, the sales-weighted average price of a battery-electric vehicle in China in 2022 was $27,000, which is less than two-thirds the average EV transaction price in Europe and less than half those in the US.
For European carmakers, trade barriers may slow down China’s expansion. But only investment in innovation and scaling up will really help companies fend off competitors and fortify their position in the auto market.
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