Tariffs are a “good communication tool” but have side effects, Tavares said.
The European Union’s new tariffs on Chinese electric cars will accelerate plant closures in Europe by local automakers because they will push Chinese manufacturers to build facilities in Europe, exacerbating overcapacity problems, Stellantis CEO Carlos Tavares said.
Tariffs are a “good communication tool” but have side effects, Tavares said during the Paris auto show on Oct. 14.
“It increases the overcapacity of the manufacturing system of Europe. The way to avoid custom duties is to build in Europe,” he added. “You are accelerating the need to shut down plants.”
Earlier this month, EU member states narrowly backed import duties on Chinese-made EVs of up to 45 percent, meant to counter what the European Commission says are unfair subsidies from Beijing to Chinese automakers. Beijing denies unfair competition and has threatened countermeasures.
Speaking to Italian media at the Paris show, Tavares mentioned the case of Chinese EV giant BYD, which is building its first European assembly plant in Hungary.
“Chinese carmakers will not go to Germany or France or Italy to build their cars, because they would have cost disadvantages there, starting from energy costs,” he said.
BYD Executive Vice President Stella Li slammed the tariffs but said it planned to make almost all the cars it sells in Europe locally.
BYD plans to produce components in Europe and assemble battery packs at its European plants in Hungary and Turkey, importing only the battery cell from China, Li said at Paris show.
BYD is still deciding whether to pass the cost of tariffs – 17 percent for BYD on top of an existing tariff of 10 percent – onto consumers or absorb the hit, Li said, adding she did not expect BYD to be able to sell cars in Europe for under €30,000 ($32,745).
“We disagree a lot on the calculations… it’s not a fair judgement,” Li said. “Politicians should stay away from tariffs, adding more cost to auto manufacturing and confusing the auto industry.”
Also in Paris, Tianshu Xin, CEO of the Leapmotor, which is controlled by Stellantis, said the EU tariffs could impact which models the company makes in Europe at Stellantis plants, but said it was too soon to say which ones.
When asked about whether the company would pass on tariff costs to consumers, Xin said decisions were not yet finalized but the company was capable of absorbing some costs because 60 percent of its vehicle development is done in-house.
European governments, including Italy, are trying to attract Asian automakers as the companies step up their commercial presence in the region. Manufacturing cars in Europe would allow them, under certain conditions, to avoid duties on EVs being introduced by the European Union.
The EU’s new tariffs on China-built electric vehicles range from 7.8 percent for Tesla, which is low because the company gets few Chinese government subsidies, to as high as 35.3 percent for automakers such as MG owner SAIC that did not cooperate with the EU’s anti-subsidy probe.
When the existing 10 percent tariff applied to imports in the EU is included, the rates will be as high as 45 percent.
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