Electric car battle: EU tariffs prompt Chinese shift to Turkey

The European Commission has temporarily imposed additional tariffs on electric cars imported from China and is soon expected to finalize them. However, the Chinese are not giving up and are finding new ways to bypass these additional charges. The new BYD factory in Turkey is intended to serve this purpose.

Europe is trying to defend itself against the influx of Chinese products, which are much cheaper than European ones. Beijing heavily supports many industrial sectors, such as electric car manufacturers and fast-fashion giants like Shein.

Brussels, in an effort to counter what the European Commission deems unfair competition from China-supported firms, imposes additional tariffs on many products, reducing their profitability. This is the case, for instance, with electric cars.

Faced with the additional tariffs, the Chinese have decided to bypass the charges by producing cars locally. Therefore, one electric car factory is being built in Hungary (another is planned), and soon also in Turkey.

On Monday (July 9), the Turkish government announced that the largest Chinese electric car manufacturer, BYD, signed an agreement to build a factory in Turkey. The contract is worth 1 billion USD.

"Turkey is part of the EU customs union, which means that vehicles can be exported to the community without additional tariffs," writes the Financial Times. The newspaper adds that the factory will be able to produce 150,000 vehicles annually and is expected to start operations by the end of 2026. The plant will create approximately 5,000 jobs.

Currently, in addition to standard tariffs of 10 percent, punitive charges have been imposed on Chinese electric cars in the EU starting July 5. "That is 17.4 percent for cars from the Chinese BYD group, 20 percent for Geely group cars, and 38.1 percent for the SAIC group (which sells electric cars under the MG brand)," writes Wyborcza.biz.

The service adds that electric car manufacturers in China (including European companies - for instance, BMW produces the iX3 model there) that cooperated with EU authorities during the investigation are subject to an average rate of 21 percent.

"Europe is finalizing higher tariffs on electric vehicles produced in China to protect local car manufacturers. BYD will be charged a total tariff rate of 27.4 percent on electric vehicles," writes the Financial Times.

The newspaper reminds us that Turkey itself also imposes additional tariffs on vehicles imported from China, not just electric ones. Ankara's rate is 40 percent.

"Turkey has a large automotive industry, home to foreign groups including Hyundai, Toyota, Renault, and Ford, often in joint ventures. According to the Turkish Automotive Manufacturers Association, car manufacturers produced about 1.5 million vehicles in Turkey last year. The EU is the country's main export market," the Financial Times writes.

UBS analysts claim that Chinese cars produced in Eastern Europe will have a 25 percent cost advantage over their European rivals.