BYD makes a profit of 15,400 USD on BYD Seal U in Europe, compared to 1,400 USD in China. This means BYD makes 14,000 USD more profit, referred as EU premium, on every Seal U model sold in the EU, according to a report by Rhodium Group.
On June 12, the European Commission (EC) investigation revealed that China’s battery electric vehicles (BEVs) and supply chains receive unfair subsidies. As a result, the EC has introduced provisional import duties on Chinese-made EVs, ranging from 17.4% to 38.1%, depending on the manufacturer. These new duties are in addition to the existing 10% tariffs.
According to Rhodium Group, the 30% duty on the BYD Seal U (see specs) would not be enough to make the profits on the car equal between the EU and China, meaning the playing field would still be uneven. A 30% duty would still leave the company with a 15% (5,080 USD) EU premium in relation to its China profits. This means BYD would still make over 5,000 USD more on Seal U sold in the EU than in China. That would keep the exports to Europe highly attractive.
Moreover, duties at this level would provide BYD with space to lower its prices in order to gain market share in Europe. “Our analysis of several other models sold in China and Germany indicates that even after a 30% duty, many Chinese EV models would still enjoy a strong EU profit premium,” Rhodium notes.
The report suggests that higher tariffs, possibly as high as 45% or even 55% for very competitive producers like BYD, might be needed to make exporting to Europe less attractive.
However, the tariffs might have an unwanted effect on Western automakers. Duties ranging from 15% to 30% could harm the business models of foreign companies like BMW or Tesla, which use China to export to Europe. For BMW’s iX3 SUV, the EU premium (after considering costs like shipping) is just 9%. This means that if duties exceed 9%, BMW would earn less from selling in Europe than in China. Higher duties could also disrupt the plans of companies like BMW, Honda, and Volkswagen to increase their use of China as an export hub for the EU market.
BMW-Brilliance (BMW’s Chinese joint venture) and Tesla are subjected to additional tariffs of 21% as they cooperated with EC during an investigation. Moreover, Tesla applied for further individual evaluation.
The price difference between foreign and Chinese producers is because Chinese producers get more subsidies than foreign ones, even though both get support from the Chinese government. Also, Chinese companies are more vertically integrated, meaning they handle more parts of the production process themselves, which lets them buy things at lower prices than foreign companies.
For example, BYD not only makes cars but also owns lithium mines, builds its own batteries, develops its own e-motors, owns large ocean carriers for export, and even owns a vehicle insurance company.
Moreover, the fierce price war is pushing the EV price down in China for all automakers, especially legacies that struggle to compete with new Chinese EV startups. Volkswagen ID.4 is 50% more expensive in Europe than in China, as the German price is 46,335 EUR (50,000 USD), while in China, it is 33,500 USD for an 80 kWh version. However, Rhodium calculated only with MSRP, the real price for which VW dealers sell ID.4 in China is 182,400 yuan (USD 25,150), as can be seen here, which makes the gap even wider.
Chinese EV makers are poised to ramp up exports despite potential EU duties. Factors driving this trend include slowing growth and tighter profit margins in China’s NEV market, as well as incentivizing exports. China is eyeing the EU as a primary export destination due to its attractive market conditions and ambitious targets set by companies like BYD and SAIC-owned MG to capture a significant market share in Europe.
Who is buying the BYD cars in Europe? NOBODY why? Its to expensive why choosing a new Chinese car brand over an exciting European car brand with samen retail price?
Madness but unfortunately the Chinese car brands fall into this trapp
Not sure why you are being downvoted. I have yet to see a single BYD here in Germany
Comparing prices in China and Europe, you also have to include VAT (roughly 20%, varies by country) and the tariffs. So, for a VW or Tesla, ~20% VAT + 10% base tariff + 21% additional tariff = ~51% tax and tariff included in the price. For BYD, it adds up to ~47%. Add in shipping and logistics, and BYD is likely still solidly profitable. Other automakers will need to increase prices.
I could never understand this stupidity that has seized the European Union. The EU should stay listening to Ursala Von Der Leyen more often! How often has she been saying the same thing the author of this article has been saying? How often did she warn the EU of the same things Elon musk had been warning, yet the EU performed this politically and economically weak act of weak tariffs? THERE’S BIG, BIG MONEY TO BE HAD BY THE EU IN THE FORM OF TARIFFS YET THE EU IS LETTING THIS GOLDEN OPPORTUNITY SLIP THRU THEIR FINGERS!!! They should be tariffing the Chinese cars into submission, then spend all that tariff money on defense or something.
The United States is being run by geniuses. They are showing the world how tariffs should be done. By raising the tariffs to a jaw-dropping amount of Oh My God 100%, the United States gets to reap all those tariff dollars to help pay down their national debt. Talk about smart! And no one, not even the consumer, gets hurt. The only ones impacted would be the bottom line of the Chinese automakers. Talk about a win-win! The American automaker wins because his competition from China is still expensive, the American consumer wins because the prices on his cars haven’t increased, and the American government really wins because they’re going to get hundreds of billions of dollars in tariff proceeds to help pay down that huge debt. That’s a win-win-win!!!
And proof positive why the United States is still the top dog in the world. 🙂
After the EUs weak tariff act on Chinese cars, it’s easy for me to see why Britain exited the European Union. The European Union is just too stupid to be a part of. Who would want to be a part of a system of countries that tariffs Chinese cars — cars that are so cheap they’re almost being given away — by only 17.35021% ??? Who? Tell me, what country would want to be a part of such weakness; such stupidity? Huh? Anybody got a clue? I’m waiting. THE EUROPEAN UNION IS BEING RUN BY A BUNCH OF LOBOTOMIZED MONKEYS! THEIR STUPIDITY IS ON DISPLAY FOR THE ENTIRE WORLD TO SEE!!!!!!
Still, nobody knows. Okay…