Europe Gives Tesla Big Help

By Douglas A. McIntyre Published Jun 12, 6:45AM EDT

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Europe Gives Tesla Big Help — © Tesla Motors Model S-1 (BY 2.0) by jurvetson

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New EU tariffs on Chinese electric vehicles will benefit Tesla Inc. (NASDAQ: TSLA | TSLA Price Prediction).

Despite the objections of large nations like Germany, the European Union put major tariffs on Chinese electric vehicles (EVs), according to the Financial Times. It helps local manufacturers like Fiat dodge competition from cheap Chinese cars. But it also helps Tesla Inc. (NASDAQ: TSLA). Europe is among its major markets. Investors have worried that China’s inexpensive but impressive EVs would knock down Tesla’s sales and market share worldwide. For now, not in Europe.

The tariffs can be as high as 25%. As the Financial Times pointed out, the tariffs also generate revenue. “Brussels is pushing ahead with Chinese electric vehicle tariffs that are set to bring in more than €2bn a year,” the paper reported.

The EU used the same reasoning as the U.S. government did when it put tariffs as high as 100% on Chinese cars. The Chinese government underwrites the costs of EV manufacturers, which means private car makers operate at a disadvantage. Whether or not that is entirely true, it keeps out competition.

What happens next? Many analysts believe that Chinese cars will be affordable even with the 25% tariffs because they already carry low prices. Local companies may be shielded, but only to a limited extent, unless they can drop EV product prices.

The other effect of the tariffs is that China may well retaliate. That means it will put tariffs on some cars built by EU-based manufacturers, making it more difficult for those manufacturers to sell their cars into the world’s largest auto market.

Tesla already sells hundreds of thousands of its cars in China each year, and it has its factory there. That means China treats it as a local company, and EU tariffs will not apply.

Europe just gave Tesla a break.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.