24/7 Insights
- Shares of Chinese EV-maker BYD soared in Hong Kong despite tariffs in the European Union.
It was broadly believed that tariffs the European Union put on Chinese electric vehicles (EVs) would slow their sales considerably. Based on stock market activity, that is not true. The bull case for BYD, the largest EV manufacturer, is that the tariffs are not high enough to block the sales of its low-price, high-quality EVs.
According to CNBC, tariffs as high as 38% per vehicle needed to be increased even more to help EU manufacturers. The news site reports, “Chinese EV-maker BYD, the top gainer on the Hang Seng Index, jumped 8% during morning trade.” One Citi analyst pointed out that the tariffs were “generally benign.” A Morningstar analyst called the increases “modest.”
The lack of market reaction to the tariffs will likely show two things. One is that the local EU companies will face price points they cannot hit yet because their EVs remain comparatively expensive. The other is that China’s retaliation by putting tariffs on EU-made cars is less likely. Why start a trade war if your companies are not likely to be hurt by the EU tariff decision?
U.S. manufacturers will probably avoid the new trouble facing EU car companies, at least in their home market. The American tariffs are 100%. That means the price of Chinese EVs will be a hurdle to sales. Chinese car companies may enter North America through Mexico, and then the United States. The chess match over what Chinese EVs cost in America has not ended.
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