Stellantis CEO Calls China EV Tariffs a ‘Trap’. He May Be Right

The chief of European carmaker Stellantis has warned that impending tariffs on Chinese electric vehicles were a “trap” that would lead to major social and economic consequences for countries that “take that path”.

Europe and the United States are on track to step up levies on imports of Chinese EVs in the coming weeks, with both countries citing a need to protect local carmakers.

But Stellantis CEO Carlos Tavares argues that such moves will only worsen inflation in the regions where they are imposed.

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Such tariffs are “a major trap for the countries that go on that path”, Tavares said.

Hiking up duties against Chinese manufacturers would not mean that Western automakers can avoid restructuring needed to meet the challenge from their lower-cost rivals, he added.

“We are not talking about a Darwinian period, we are in it,” Tavares said at the Reuters Events Automotive Europe conference, adding that the price battle with Asian rivals would be “very tough”.

“When you fight against the competition to absorb 30% of cost competitiveness edge in favour of the Chinese, there are social consequences. But the governments, the governments of Europe, they don’t want to face that reality right now.”

Chinese automakers are already on track to sell 1.5 million vehicles in Europe. That’s equivalent to a 10% market share and up to 10 assembly plants worth of production, Tavares said.

“If we let the share of the Chinese OEMs grow … then it’s obvious that you are going to create an overcapacity, unless you fight against that competition,” Tavares said.

In July last year, Tavares described China’s increasing EV exports to Europe as an “invasion” and said that competition with Chinese manufacturers was “extremely brutal”.

He said Western carmakers needed to use “the same weapons” as their Chinese rivals and source parts in lower cost countries. Tavares also advocated for partnerships with battery suppliers “that offer the best combination of energy, cost and weight.”

Four months later, Stellantis announced plans to build an EV battery factory in Europe, with China’s CATL.

Climate goals at risk

While the EU’s initial decision on tariffs against Chinese EV imports is expected on June 5, the United States has already said it will impose 100% duties to bar shipments of Chinese EVs.

And Tavares’ warning on the effectiveness of such tariffs could be prophetic, if you consider the case of the Dolphin Mini — an EV launched last year by China’s biggest seller BYD.

Earlier this month, the Washington Post reported the car’s efficiency and overall capabilities could match those of much costlier Western rivals. The car’s higher range model is currently priced around $12,000.

But even with a 100% levy the Dolphin Mini will still be far cheaper than Tesla’s entry-level Model 3, which is priced at nearly $39,000.

Added to that are concerns that such tariffs would jeopardise ambitious goals set by Europe and the US to significantly cut emissions by 2035.

Such tariffs “will certainly slow the adoption of clean technologies,” one expert told US publication Politico earlier this month.

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Fear of retaliatory Chinese tariffs

An added risk stemming from such tariffs is possible retaliatory action from China.

On Tuesday, Chinese state-backed newspaper Global Times reported that a government-affiliated auto research body has recommended raising import tariffs on large gasoline-powered cars to 25%.

Liu Bin, chief expert of China Automotive Technology & Research Center (CATARC) and deputy director of China Automotive Strategy and Policy Research Center, told GT that such a hike would be in line with WTO rules.

China’s current import tariff for cars is 15%.

The recommendation weighed on European autos stocks on Wednesday, sending shares German carmakers of BMW and Mercedes down by more than 2%.

German auto firms have previously expressed concerns on the possibility of retaliatory tariffs from China — the world’s biggest car market.

CATARC’s Liu insisted, meanwhile, that the recommended tariff hike was to support China’s push towards green and low-carbon development and “fundamentally different from the protectionist moves by certain countries”.

He did make note, however, of “restrictive measures in the new-energy vehicle sector” taken by “certain countries.”

“Such measures will only hurt the interests of their own consumers,” Liu said.

Reuters, with additional reporting from Vishakha Saxena

Vishakha Saxena

Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. She has worked as a digital journalist since 2013, and is an experienced writer and multimedia producer. As a trader and investor, she is keenly interested in new economy, emerging markets and the intersections of finance and society. You can write to her at [email protected]