The European Union may have just given Tesla’s future sales in the region a boost by setting tariffs on its China-made vehicles considerably below those imposed on rival electric carmakers.
Tesla, which has a factory near Berlin but exports many of the cars it makes in China to Europe, had requested that the EU recalculate its rate, initially set at 20.8%.
On Tuesday, the European Commission, the EU’s executive arm, set that rate at 9%.
Gregor Sebastian, a senior analyst at think tank Rhodium Group, said he was “surprised” that Tesla’s additional tariff had been set at “only 9%.” He pointed to local government loans that the company has received in Shanghai, as well as subsidized batteries from Chinese battery maker CATL.
“But it’s tricky to make a strong argument here without seeing all the inputs and methodology the Commission used,” he added.
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Geely, which owns Sweden’s Volvo, has been hit with an additional 19.3% tariff. And cars made by BYD — which is vying with Tesla to be the world’s biggest seller of battery EVs — are subject to an additional duty rate of 17%.
These are slightly lower than the duties proposed in June following a more thorough investigation and input from the automakers, the Commission said.
After the initial EU tariffs took effect in July, Tesla hiked the price of its Model 3 in Europe by about 4%, or €1,500 ($1,666), to €42,490 ($42,177), blaming the additional duties.
Still, the Model 3 remains cheaper than the BYD Seal, according to George Whitcombe, an automotive research analyst at consultancy Rho Motion. “Now, with Tesla’s additional tariff being reduced … it will help the Model 3 remain competitive with other Chinese-made EVs in Europe,” he told CNN.
BYD, for its part, has not yet raised prices in Europe despite the hefty additional tariff.
“BYD has a much better ability to absorb these additional duties because production costs are much lower compared to their prices in Europe,” said Sebastian of Rhodium Group. He estimates that BYD could absorb an additional EU tariff of up to 45%.
BYD could escape tariffs altogether by making cars in Turkey for the EU market. Imports from Turkey are not subject to tariffs.
Regardless of higher tariffs, Chinese EV makers are unlikely to give up on Europe, which accounted for more than a third of their exports last year, more than the next five largest markets combined, according to Citi.