The European Union (EU) is moving forward with its tariffs on Chinese electric vehicles (EVs). Indeed, as of Friday, July 5, the EU has imposed a tariff of up to 37.6% on EVs imported from China.
As Reuters reports, this new policy also includes a “four-month window during which the tariffs are provisional with intensive talks expected between the two sides.” Still, news of this development has sent Chinese EV stocks into the red this morning as the sector prepares for geopolitical tensions. For investors, this means a complicated industry outlook for the global EV market.
What’s Happening With Chinese EV Stocks?
Trading is off to a rocky start for Chinese EV stocks today. Both Nio (NYSE:NIO) and Li Auto (NASDAQ:LI) are currently down more than 1%. Meanwhile, things are worse for XPeng (NYSE:XPEV), which has fallen over 5%. Even industry leader BYD (OTCMKTS:BYDDY) is in the red as news trends of its global expansion initiatives.
Auto industry groups in China have made it clear that they are unhappy with the EU’s decision. Indeed, per Reuters, the China Association of Automobile Manufacturers (CAAM) is reportedly “strongly dissatisfied” with the new policy.
This makes sense, given how many Chinese EV producers will be impacted by the development. The Associated Press provided the following breakdown for different affected companies:
“The rates, if applied, would be: 17.4% on cars from BYD, 19.9% on those from Geely and 37.6% for vehicles exported by China’s state-owned SAIC. Geely has brands including Polestar and Sweden’s Volvo, while SAIC owns Britain’s MG, one of Europe’s bestselling EV brands. Other EV manufacturers in China including Western companies such as Volkswagen, BMW and Tesla would be subject to duties of at least 20.8%. The commission mentioned that Tesla might get an ‘individually calculated’ rate if duties are definitively imposed.”
Why It Matters
This isn’t the only international tariff that has threatened Chinese EV stocks recently. As InvestorPlace’s Eddie Pan reports, the threat of Canadian tariffs also rocked shares of Chinese EV firms last month. Meanwhile, tariffs from the U.S. are scheduled to take effect in August. And if former President Donald Trump is reelected, he will likely increase tariffs even further.
Overall, Chinese EV stocks are facing a highly uncertain future. With tariffs from the EU taking effect and even more coming from the States, it will be difficult for Chinese EV firms to continue competing on a global scale.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, Samuel O’Brient held a long position in Polestar (PSNY). The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
