The European Union has announced a significant reduction in the planned tariffs on Tesla NASDAQ:TSLA vehicles imported from China. Originally set at 20.8%, the tariff has now been slashed to 9%, following concerns over improper subsidies to Chinese electric vehicle manufacturers, which the EU believes have created an unfair competitive landscape for European automakers.
This decision is part of a broader EU initiative aimed at levelling the playing field in the electric vehicle market. While Tesla will benefit from the reduced tariff, other Chinese manufacturers will face tariffs as high as 36.3%.
The tariff adjustment, which is still in draft form and subject to further approvals, will be in addition to the existing 10% import duty on battery electric vehicles. If approved, the new tariffs will remain in place for the next five years.
Tesla had requested an individual assessment so that its China-made vehicles would not be caught in the EU tariffs. The EU has also adjusted tariffs downwards for some Chinese EV makers, among them Geely and BYD, which will both be paying under 20% for exports to the EU.
Is Tesla a buy, sell or hold?
Tesla shares saw a positive response, rising 0.93% in pre-market trading on Tuesday. The stock is trying to rally out of a recent dip to $191 after the company reported slower sales (net income for Q2 fell 45% which was well off analysts’ consensus estimates). Tesla’s revenues have risen, however, narrowly exceeding expectations.
Rahul Bhushan, Managing Director of ARK Invest Europe said: “This reduction in tariffs is a significant win for Tesla and the broader European electric vehicle market. It reinforces Tesla’s position as a leader in sustainable mobility while ensuring that European consumers continue to have access to cutting-edge electric vehicles at competitive prices. This move is a positive step toward fostering fair competition and innovation in the industry”.
Tesla has benefited from below-market value battery supplies. income tax reductions and advantageous land use agreements in China.
Tesla CEO Elon Musk has massive ambitions for the company, and says he still plans to eventually launch the world’s first fleet of self-driving taxis. This is part of a broader strategic move that could turn all Tesla vehicles into a giant, autonomous fleet of cars.
- Podcast: ARK Invest’s CEO Cathie Wood on US markets and active ETFs
- Nano One awarded US$12m by US Department of Defense for LFP battery work
- IPO Radar: GenIP, Hozon New Energy Automobile, Wealthsimple
China’s EV exports to Europe are down
According to information from Dataforce, registrations from China-made EVs such as those built by BYD and MG are down 45% in the EU on a quarter-by-quarter basis. China’s Passenger Car Association said that exports of Chinese NEVs, both electric vehicles and plug-in hybrids, were down 15.2% in June (compared to May figures).
Bucking the trend is Tesla challenger BYD, which managed to increase its market share in the EU by 8.5% in July. BYD increasingly looks like a very potent rival to Tesla. It became the world’s biggest seller of EVs in Q4 last year, a title it still holds.
While European tariffs could have been a significant obstacle for Tesla, the real challenge is going to be its cheaper Chinese rivals. While they will have to pay higher tariffs than Tesla in Europe, they are rapidly eating into Tesla’s market share, especially in lucrative Asian markets.
