Chinese EVs Defend Market Share in Europe as Trade Tension Escalates

(Bloomberg) -- Chinese electric-car brands held on to their share of the slumping European EV market in May, ahead of new tariffs designed to protect local carmakers from their lower-cost imports.

Automakers like BYD Co. made up 8.7% of total EV sales, roughly on par with a year ago, as Chinese firms pressure European counterparts with new, inexpensive models, according to researcher Dataforce. Total deliveries fell 12% to 13,390 vehicles, a drop that marginally outweighed the let-up in demand for all-electric models across the region.

Since 2019, Chinese carmakers led by SAIC Motor Corp. — which turned Britain’s defunct MG brand into an EV dynamo — have captured a growing slice of a market vital to Europe’s industrial stability and future jobs. Their growing success prompted the European Union last year to probe government aid to the sector. On Thursday, the EU moved ahead with provisional import tariffs of as much as 48%, up from a current 10%.

The EV shift in Europe has recently slowed, with all-electric sales in May declining 11% — they now make up just 14% of the region’s passenger-car market. Yet battery-powered cars remain on course to take over as the EU phases out sales of fuel-burning vehicles by the middle of the next decade.

That’s where Chinese carmakers see an opening to conquer a lucrative export market: lower-cost battery technology and generous government support give them an advantage over the likes of Volkswagen, Stellantis and Renault. State aid for Chinese manufacturers has brought Beijing to the brink of a trade war with the EU, with China threatening to retaliate.

The tariffs also target Chinese-made models including BMW’s iX3 SUV, Renault’s Dacia Spring and Tesla’s Model 3. In all, nearly two in five battery-electric cars sold across Europe were made in China, according to automotive consultants Jato Dynamics.

While they’ve maintained market share, Chinese brands haven’t avoided the slump in European EV demand. MG’s sales in the region slid 34% in May from the year-ago period, based on data from Jato. 

“Concerns around the upcoming measures taken by the EU, and more focus on ICE cars explain this negative result for the brand,” said Felipe Munoz, senior analyst at Jato, referring to models powered by internal combustion engines. “However, BYD did quite well, thanks to the Atto 3 SUV and the introduction of the Seal, Dolphin and Seal U.”

More broadly, the removal or scaling back of EV buying subsidies continues to hurt demand. Sales in Germany slid 31% in May from a year earlier, after Europe’s biggest automotive market pulled incentives for battery-electric cars late last year.

While talks with the EU could yet avert a trade war, China has threatened to retaliate with levies on cars with large engines that would hit German luxury manufacturers like Mercedes-Benz Group, BMW and Porsche. Chinese officials have also taken aim at French brandy and Spanish ham in a bid to deter the new EV tariffs.

(Updates with EU moving ahead with tariff plan)

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