Significant price differences for Chinese EVs in foreign markets

Strong Demand in Western Europe

The study highlights the benefits of the Western European market from the standpoint of Chinese EV manufacturers.

Despite additional tariffs recently imposed by the European Union, Chinese EVs sell at vast price premiums in countries such as the UK, Germany, and the Netherlands. For example, BYD’s Dolphin, which goes for €12.947 in China, retails at around €35.490 in the Netherlands—a 174% premium. Equally astonishingly, the SAIC MG4 Electric 64kWh, sold at home for €17.939, is sold at €35.785 in the Netherlands, just under double the home country price.

Such pricing allows Chinese manufacturers to still enjoy healthy profit margins after adjusting for costs of shipping and tariffs. For example, the Atto 3 Comfort from BYD, whose price in China is €17.923, retails at €39.990 in Germany, translating to a price premium of 123%. According to the manufacturer, the profit margins remain attractive despite the European Commission introducing an additional duty of between 17% and 38% as recently as this summer.

Profit Margins and Tariffs

Research by the Rhodium Group concluded that BYD continues to profit 38% more in Europe, even after the new tariffs are taken into account, than in its domestic market.

However, this might not make the new tariff regime as attractive for all Chinese carmakers. State-owned SAIC, which will be imposed the highest additional tariff rate of 38,1%, may have to set up a local manufacturing base to salvage the effect of such tariffs. This move can keep them competitive and in the market’s good graces as trade barriers rise.

Future Market Focus

Looking ahead, Chinese EV manufacturers will continue to shift their focus to the high EV adoption rate in Western Europe and enabling decarbonization policies. By 2030, it’s forecasted that 15% of vehicles in the Western European market will be Chinese-brand automobiles, while 70%-80% of those vehicles are EVs.

These OEMs would increase competitive pricing and aggressive market expansion plans, capitalising on Europe’s transition to electric mobility. The other fast-growth market for Chinese EVs is Southeast Asia, where rapid economic growth and the rise of the middle class offer considerable opportunities to Chinese manufacturers. Chinese exports of electric cars to Asia have surged by 68% over the first four months of 2024, as indicated in the BBVA Research report.

Expansion in Southeast Asia

Thailand has especially seen a wave of rising EVs from China, with the region having close economic relations with several Eastern countries and benefiting from favorable trade policies under RCEP.

Compared with Southeast Asia, Latin America’s automobile market is more mature but still provides huge potential to Chinese EV manufacturers. Country-wise, Brazil has been a leading market because of its policies to promote local auto production. In April alone, Chinese exports of EVs to Brazil surged thirteenfold compared with last year. The market share in Brazil will account for the most significant volume of Chinese EVs for two consecutive months this year.

However, relatively high tariffs in the region remain a challenge that Chinese manufacturers need to tackle cautiously. Chinese EV manufacturers like BYD, Geely, and SAIC all actively invest in overseas expansion to balance the effects of tariffs and trade barriers. For instance, BYD plans to open its first car factory for Europe in Hungary and a line in Thailand; SAIC increases the MG brand into new markets, such as India, Australia, Mexico, Spain, and Indonesia.

Strategic Investments and Future Outlook

These strategic investments not only allow Chinese manufacturers to avoid paying tariffs but also to take advantage of growth in local markets.

The report from BBVA Research is a thorough analysis of the dynamics of pricing and strategic positioning of Chinese EVs in world markets. Significant price premiums in Western Europe underline its relevance to Chinese manufacturers despite significant challenges that new tariffs will add. This period of uncertainty will continue to place the onus on Chinese automakers to find ways of negotiating these obstacles while keeping up their level of profitability and market share.

This report clearly shows the considerable economic advantages of the Chinese EV manufacturers in the European market, enabling them to stay on top of growth and further expansion pressures from the ongoing changes in the trade landscape. Now placed perfectly, with continued investment in local manufacturing and strategic expansion into newer markets, Chinese EV makers seem prepared to be critical players in the world’s auto industry.

Source: BBVA Research