Analysis || BYD’s factory in Hungary won’t be enough to circumvent all EU tariffs on Chinese car brands. “Europeans will always suffer,” says Abel Matthäus. On the one hand, there are the low prices, which are allegedly subsidized; on the other, there is European industry and its jobs

BYD’s announcement to build a factory in Hungary was seen as a way to get around European tariffs on Chinese electric car imports. But it may not be enough to guarantee the low prices that manufacturers in that country would like: The components themselves may have to bear the tariffs, making final costs even more expensive.

“If Chinese companies decide to manufacture in Europe,” for example in Hungary, “the cars will no longer be imported and will not be subject to EU tariffs,” explains Abel Mateus, former chief economist at the World Bank. CNN Portugal. But she immediately warns: “There will always be a need to import materials from China, as is the case with lithium batteries,” and these components remain subject to tariffs.

“Hungary must respect the EU’s foreign trade policy,” the economist stresses, meaning that as much as it is interested in attracting foreign investment and is open to agreements with China, “Hungary must impose a 38% tariff on Chinese imports of electric cars and the materials needed to manufacture them coming from that country.”

The issue is even more complicated: existing European manufacturers also import components from China, which will also lead to higher costs. “All materials coming from China will have to be subject to EU tariffs, which will lead to an endless war,” warns Abel Mateus. Since “European brands will have to be covered,” Europeans “will always suffer.” The economist, who was head of Portugal’s competition authority, gives the example of the 1980s, when the United States allowed Japanese factories to enter the country: “The Americans have evolved and improved in many ways, but there has been a decline in the country’s companies.”

Trade war

This is another episode in the EU-China trade war in the car market, where the growth in Chinese electric car sales has had consequences for the results of major European manufacturers – starting with Volkswagen, which is threatening to close factories in Germany.

According to one Study by AlexPartnersChinese automakers are expected to account for 33% of the global car market by 2030 (the current share is 21%), which has sparked protectionist decisions in the West: both the European Union and the United States have announced tariffs on Chinese car imports. Chinese vehicles .

The United States increased tariffs on September 13. to 100%Higher than that announced by the European Commission In July Up to 38%, with tariffs applied to three specific Chinese products, BYD (17.4%), Gelly (19.9%) and SAIC (37.6%).

The EU justifies this decision as compensation for anti-competitive measures taken by China: European Commission Investigations “I concluded that the BEV value chain [veículos de bateria elétrica] The foundation explained that “China benefits from unfair support, which poses a threat of economic damage to electric car producers in the European Union.”

In the face of these government subsidies from China, Chinese cars enter Europe at prices significantly lower than those of European competitors, the European Commission claims. Even if the final prices charged in Europe, for example by BYD, are more than double those charged in China, according to a study by BYD. Reuters April Investigation.

“If the market is free, China can eliminate all other countries,” João Rodrigues dos Santos, an economics professor at the European University, told CNN Portugal. By applying tariffs, he says, “the EU aims above all to protect domestic employment.” “If this law is not enforced, consumers will prefer Chinese electric cars, because they are cheaper.”

The United States and Europe are the largest markets for Chinese exportAccording to João Rodrigues dos Santos, “If these types of tariffs continue, they could lead to a global trade war, as countries will face the need to become self-sufficient. This will make them increasingly dependent on the external economy. However, the application of tariffs at the moment is the simplest and most credible solution. But he emphasizes that this difficulty in competing with the Chinese market contributes to the country being a major exporter of lithium batteries for electric vehicles.

But which is better, protecting European jobs or ensuring lower prices for European consumers? The answer always depends on issues of healthy competition, but Rodrigues dos Santos also adds that “it is necessary to understand whether the benefits of these positions for family budgets overlap with those of the 13 million people employed in the automotive sector.”

The Hungarian Problem

The fact that Chinese construction companies eventually built factories in Hungary – to circumvent tariffs imposed on the European continent – ​​has caused concern among industry representatives. João Rodrigues dos Santos offers a political reading: “The Hungarian regime is close to those that are against the interests of the European Union, which shows which side the country is on under Viktor Orbán.” However, the economist believes that any consequences for the country “may take a long time.”

Carlos Zurino, a former MEP, makes the case in general terms: the EU “should take the Draghi report on competitiveness into account and provide a systemic response to systemic problems.” This case is the study by the former president of the European Central Bank, which highlights the long-term risks to European competitiveness. For Zurino, “all international companies that set up shop in Europe must respect European rules and culture, as is the case with this company that set up shop in Hungary.” The former socialist MEP stressed that he did not know this specific case in detail, recalling that “any company that does not respect the rules required by the EU can be sued.”

Volkswagen alarm

“All car companies are in trouble,” but “Volkswagen is currently a more worrying case,” says Abel Matthäus, referring to the threat of the company’s factories in Germany closing, “something that hasn’t happened for several years.”

After 87 years of history, Volkswagen's rare decision came as a result of the difficulty of converting its cars from fossil fuels to electric cars – which are cleaner, but less profitable.

Autoeuropa, which is directly and indirectly responsible for around 5,000 jobs in Portugal, may not be affected by the closure of factories in Germany, especially since the Portuguese plant is “the only one where the T-Roc is produced,” says Abel Mateus. “Orders in Portugal could fall as a result, which means that Autoeuropa will have to start thinking about solutions such as reducing human resources, or returning to layoffs,” admits João Rodrigues dos Santos.

Other companies, such as Stellantis, which resulted from the merger of the Italian-American groups FCA and the French PSA (owners of Peugeot and Citroën), also showed some declines. In the first half of 2024, the company's operating profit fell by 40%.