The Chinese government’s incentives for its new energy vehicle (NEV) manufacturers have been a topic of discussion in the industry, particularly as they expand into Europe. Last year, the European Commission imposed tariffs on Chinese electric vehicle imports, ranging from 7.8% to 38.1%, on top of the existing 10% tariff. This was in response to what the commission called “unfair trading practices.” The tariffs were calculated based on the transparency of each brand during the EU’s investigation.
Ford CEO Jim Farley has argued that China’s dominance in the auto industry is largely due to government support. He stated that China is “completely dominating the EV landscape globally” due to “great innovation at a very low cost.” Farley also noted that hundreds of Chinese companies, including BYD and Geely, are sponsored by their local governments, giving them a significant advantage. The Centre for Strategic & International Studies reported that China’s government spent at least $230 billion to support domestic electric vehicle manufacturers between 2009 and 2023.
The success of Chinese EV makers has also been attributed to lower costs on both manufacturing and labor. Rivian’s CEO RJ Scaringe noted that it’s “inconceivable” that Western markets would not allow their domestic manufacturers to produce in China, while allowing Chinese companies to do so. Despite tariffs, Chinese automakers are expected to expand further into the United States in the next decade. Morgan Stanley analysts noted that Jim Farley praised Xiaomi’s SU7, saying he aims to make a similar car in a few years.
The EU has encouraged Chinese carmakers to set up factories in Europe, which would exempt them from tariffs. However, the EU’s top trade official, Sabine Weyand, stressed that these companies must follow European rules to keep competition fair. In the United States, Chinese electric vehicles face steep tariffs, including a 100% tariff on EVs and a 25% tariff on EV batteries. A trade deal between the US and China has temporarily reduced tariffs, but global trade tensions remain.
Chinese automakers, including Nio, XPeng, and Xiaomi, have taken part in discussions with the EU to avoid higher tariffs while expanding their presence in the European market. The two blocs have agreed to investigate the possibility of setting minimum prices for imported EVs as an alternative to tariffs. As the global auto industry continues to evolve, the competition between Chinese and Western manufacturers is expected to intensify, with government support and trade policies playing a significant role in shaping the landscape.