China’s electric vehicle exports saw a decline in June, according to data released by the China Association of Automobile Manufacturers on Wednesday. The export volume dropped by 13.2% to 86,000 vehicles, indicating a growing resistance to Chinese electric vehicles as the European Union significantly raised import tariffs.
In recent months, China’s electric vehicle exports have been on a downward trend, with the latest data showing a third consecutive monthly decline since March.
The electric vehicle industry in China is facing pressure from the European Union, which announced in June an additional temporary tariff of up to 37.6% on Chinese-made electric cars. This measure was taken to counter unfair subsidies by the Chinese authorities to the electric vehicle industry and came into effect on July 4.
Even before the implementation of these temporary tariffs, China’s electric car exports had already started decreasing. This was partly due to Europe initiating customs registration procedures in March to ensure appropriate tariff applications could be traced.
Domestically, electric vehicle sales in China for the first six months of 2024 increased by 35.1% compared to the same period last year, reaching 4.33 million units. Overall, China’s total automobile sales saw a 1.4% growth to hit 11.25 million units. However, the growth rate of electric vehicle sales within the domestic market has slowed compared to the 44.1% growth recorded in the first half of the previous year.
Against the backdrop of a long-standing real estate crisis, weakening economic growth, and declining population, domestic demand in mainland China has remained sluggish. Export remains a key driver of China’s economic development and absorption of industrial output, intensifying contradictions between China and Western and other economies concerned about the influx of cheap Chinese goods impacting local markets.
Last October, as the EU deliberated whether to impose additional tariffs on electric cars for five years, negotiations were ongoing between China and the European Commission. China threatened retaliation, vowing to sue and investigate European imports of brandy and pork under the pretext of anti-dumping measures.
Analysts believe that while the permanence of Europe’s new tariffs remains uncertain, the escalating trade tensions have become a significant impediment, potentially forcing Chinese car manufacturers to diversify their export markets.
Fitch Ratings, an international credit rating agency, stated that Chinese car manufacturers may increase investments in alternative markets. BYD Auto’s current major export markets include Brazil, Thailand, Israel, Australia, and Malaysia.
Meanwhile, another emerging risk is coming to light. The Eurasia Group, a U.S.-based consulting firm, warned in a recent report that China’s significant shift towards electric vehicles signals an oversupply of internal combustion engine car capacity, which could result in further political and economic repercussions.
In the first half of 2024, internal combustion engine cars represented 78% of China’s total automobile exports.
The Eurasia Group mentioned that low-cost Chinese internal combustion engine cars may attract some interest in emerging markets, but they will also directly compete with established traditional car manufacturers from the West and other regions.
“This will bring more direct consequences for car manufacturers outside of China,” the consulting firm cautioned, warning of potential additional political tensions.