BYD stock can’t be stopped.
Even in the E.U., where regulators slapped onerous tariffs on Chinese EVs.
You see, the E.U. set a goal of having all new cars and vans be zero-emission vehicles by 2035.
A lofty goal, to be sure. And one that won’t be reached because the EU is eschewing the one thing that would enable reaching this goal: Chinese EVs.
If you’re a regular reader of these pages, you know that the EU recently increased its tariffs on Chinese EVs. They’re now as high as 35%, and that doesn’t include the standard 10% import duty.
The EU implemented these tariffs in an effort to protect its own auto industry, which continues to struggle. According to Italian economist Mario Draghi, the EU car industry is suffering from higher production costs. Which are about 30% higher in the EU compared to China. Lagging technological capabilities, supply chain dependencies, and declining brand value are also burdening the EU auto industry.
Draghi recommended the EU institute measures to lower energy and labor costs, and increase automation in the sector. But even if the E.U. could implement these measures, it would take at least a decade for it to crawl through its own bureaucracy to get this done. So the question is, for the EU, which is more important? Figuring out how to make its auto manufacturing sector strong again? Or meeting its own zero-emission vehicle mandate?
I believe it’ll prove to be the former. But the EU car market won’t return to its glory days. Not with China banging out all types of cars these days, that in many cases are on par with what VW, BMW and Mercedes are pumping out. And for a fraction of the cost.
In fact, while the EU has slapped some pretty overzealous tariffs on Chinese EVs, Chinese car companies can still export conventional and hybrid vehicles into the EU without those tariffs. And that’s exactly what they’re doing. They’re now actively pivoting to hybrids for Europe to counter those tariffs on EVs. European imports of Chinese hybrid vehicles will grow in excess of 20% next year.
According to Reuters, from July to October, hybrid exports to Europe more than tripled to 65,800 units from the same period a year earlier. Which helped exports of plug-in hybrids and conventional hybrids account for 18% of China’s total vehicle sales to Europe in Q3. Doubling from 9% in the first quarter. Meanwhile, the proportion of EV shipments fell to 58% from 62% during the same period.
BYD Stock for the Win
The Reuters piece also added that Chinese automaker BYD (OTCBB: BYDDY) is taking on VW and Toyota in Europe with its first plug-in hybrid model for the region, the Seal U DM-i.
It’s priced 700 euros below VW’s best-selling PHEV, and 10% cheaper than Toyota’s C-HR PHEV.
In terms of Chinese automakers, I maintain that BYD is the undisputed leader, as it continues to expand its presence across the globe. And that includes Europe. Where even with those tariffs, BYD can still earn a profit on five of its EV models.
Attempting to thwart China’s automotive industry with tariffs will prove unsuccessful. There’s always going to be a work-around. The only tangible result of these tariffs will be the EU falling short of its zero-emission vehicle mandate. Because there’s no way in hell that any of the European car makers will be able to pump out enough competitively priced EVs in time to meet the 2035 deadline.
In the meantime, however, China will continue to export its EVs to other parts of the world where providing affordable vehicles to the masses trumps protectionism.
