BYD profit in EU is 10x higher than in China and even with new 30% tariffs, still makes 5,000 USD per vehicle
BYD makes a profit of 15,400 USD on BYD Seal U in Europe, compared to 1,400 USD in China. This means BYD makes 14,000 USD more profit, referred as EU premium, on every Seal U model sold in the EU, according to a report by Rhodium Group.
On Jun 12, the European Commission (EC) investigation revealed that China's battery electric vehicles (BEVs) and supply chains receive unfair subsidies. As a result, the EC has introduced provisional import duties on Chinese-made EVs, ranging from 17.4% to 38.1%, depending on the manufacturer. These new duties are in addition to the existing 10% tariffs.
According to Rhodium Group, the 30% duty on the NYD Seal U would not be enough to make the profits on the car equal between the EU and China, meaning the playing field would still be uneven. A 30% duty would still leave the company with a 15% (5,080 USD) EU premium in relation to its China profits. This means BYD would still make over 5,000 USD more on Seal U sold in the EU than in China. That would keep the exports to Europe highly attractive.
Moreover, duties at this level would provide BYD with space to lower its prices in order to gain market share in Europe. "Our analysis of several other models sold in China and Germany indicates that even after a 30% duty, many Chinese EV models would still enjoy a strong EU profit premium," Rhodium notes.
The report suggests that higher tariffs, possibly as high as 45% or even 55% for very competitive producers like BYD, might be needed to make exporting to Europe less attractive.
However, the tariffs might have an unwanted effect on Western automakers. Duties ranging from 15% to 30% could harm the business models of foreign companies like BMW or Tesla, which use China to export to Europe. For BMW's iX3 SUV, the EU premium (after considering costs like shipping) is just 9%. This means that if duties exceed 9%, BMW would earn less from selling in Europe than in China. Higher duties could also disrupt the plans of companies like BMW, Honda, and Volkswagen to increase their use of China as an export hub for the EU market.
BMW-Brilliance (BMW's Chinese joint venture) and Tesla are subjected to additional tariffs of 21% as they cooperated with EC during an investigation. Moreover, Tesla applied for further individual evaluation.
The price difference between foreign and Chinese producers is because Chinese producers get more subsidies than foreign ones, even though both get support from the Chinese government. Also, Chinese companies are more vertically integrated, meaning they handle more parts of the production process themselves, which lets them buy things at lower prices than foreign companies.
For example, BYD not only makes cars but also owns lithium mines, builds its own batteries, develops its own e-motors, owns large ocean carriers for export, and even owns a vehicle insurance company.
Moreover, the fierce price war is pushing the EV price down in China for all automakers, especially legacies that struggle to compete with new Chinese EV startups. Volkswagen ID.4 is 50% more expensive in Europe than in China, as the German price is 46,335 EUR (50,000 USD), while in China, it is 33,500 USD for an 80 kWh version. However, Rhodium calculated only with MSRP, the real price for which VW dealers sell ID.4 in China is 182,400 yuan (USD 25,150), as can be seen here, which makes the gap even wider.
Chinese EV makers are poised to ramp up exports despite potential EU duties. Factors driving this trend include slowing growth and tighter profit margins in China's NEV market, as well as incentivizing exports. China is eyeing the EU as a primary export destination due to its attractive market conditions and ambitious targets set by companies like BYD and SAIC-owned MG to capture a significant market share in Europe.
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RedDevil7 : I suspect the 10x profit margins comparison exclude the cost factors, such as transportation and etcs.
I am generally disagree that Chinese government still subsidise the Chinese brand car, it is not longer the case anymore. Another unfounded excuse to impose tariff on Chinese car.
bullrider_21 OP RedDevil7 : I agree with you. Shipping cost is not included.