Tariffs on Chinese EVs Will Speed up EU Plant Closures: Tavares

The European Union’s tariffs on electric vehicles made in China will speed up plant closures in Europe by local automakers, the CEO of carmaker Stellantis warned on Monday.

The tariffs will push Chinese manufacturers to build facilities in Europe – and that would exacerbate problems related to China’s overcapacity, Carlos Tavares predicted on Monday at the Paris Auto Show.

European governments, including Italy, are trying to attract Asian automakers as companies step up their commercial presence in the region, but they are more likely to be based in Eastern Europe, he suggested.

ALSO SEE: China Eyes $850bn 3-Year Bond Issue to Lift Slowing Economy

Manufacturing cars in Europe would allow Chinese companies, under certain conditions, to avoid duties on EVs being introduced by the European Union.

Tariffs were a “good communication tool” but have side-effects, Stellantis CEO Carlos Tavares said.

“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”.

Speaking to Italian media, 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.

Rome, which is at odds with Stellantis over its declining output in Italy, has said it is in talks with Asian automakers over possible manufacturing investments, including with China’s Dongfeng and Chery Auto.

Xpeng: No intent to ‘overthrow’ Western rivals

Meanwhile, Chinese carmakers at the car show in Paris – aware of the trade tension with the EU over their highly subsidized “EV invasion” – denied wanting to “overthrow” their western rivals, according to a report by the FT.

“We’re a 10-year-old company. We’re not going to overthrow anybody who’s developed over 100 years,” Xpeng co-president Brian Gu was quoted as saying, while showing off an EV with “highly advanced artificial intelligence technology.”

Feng Xingya, general manager of state-owned carmaker GAC, also reportedly displayed a conciliatory manner, saying: “When we come to the European markets, we come with an attitude to cooperate,” he said, according to the report.

Their remarks are not surprising, given that Stellantis, which makes Peugeot and Fiat, and other local carmakers have issued profit warnings because of declining sales, as more citizens opt for EVs.

Some, such as Renault, have also conceded that they may “need some help” with the production of EV batteries.

The key factor spurring this dramatic transition is, of course, the increasingly bleak news on global warming.