Big takeaways
1. E.U. tariffs could hurt Tesla sales in Europe when they’re already suffering in the region
2. E.U. tariffs may be higher for Tesla than for rival BYD, which would put Tesla further behind BYD as it looks to expand in Europe with a factory in Hungary
3. Tesla’s Germany factory could save the day, but it’s struggled this year
Breaking it down
E.U. tariffs on China-made vehicles might be another nail in the coffin for Tesla in Europe — or at least on its chances of maintaining its crown as the top electric vehicle company there.
The European Union imposed tariffs on EV imports from China over concerns that vehicles made in the country were benefiting from subsidies that undercut European producers. The tariffs went into effect on Friday but won’t be paid until this fall — when final rates are set for all carmakers — barring an agreement between the European Commission and China or a move from E.U member countries to block the tariffs. The tariffs total 17.4% for Tesla’s rival BYD, 37.6% for SAIC Motor, and 19.9% for Geely; they start at 21% for Western EV companies manufacturing in China.
Tesla has been a top pick EV in Europe, and it’s led the wave of China-made electric vehicle exports to Europe since 2021, surpassing its rival, Chinese EV-maker BYD. But BYD has recently surged ahead of Tesla and threatened its dominance in Europe.
Tesla is asking European regulators for an individually calculated tariff lower than the 21% starting point for its Western counterparts in China, but it may not receive as low a rate as BYD, which could further injure its chances of competing with BYD in European markets. Tesla’s biggest hope for succeeding in Europe has been its gigafactory in Germany, which was more of a hindrance than a help so far this year. The factory was forced to shut down briefly in Europe after an arson attack that cost it $1 billion. Tesla sales in Europe fell 36% in May alone from last year, and its plans to raise prices on the Model 3 in Europe amid the new tariffs may make matters worse.
Meanwhile, BYD is growing in overseas markets and plans to build a factory in Hungary so it may overtake Tesla in Europe by 2030.
If Tesla can turn around its Germany factory and secure lower tariffs from the E.U., it may stand a fighting chance. German authorities on Thursday approved Tesla’s expansion plans for the plant as the company looks to ramp up production there to 1 million EVs a year, up from its current rate of 300,000.
Taking the more optimistic view, Wedbush analyst Dan Ives told Quartz,“We do not see [EU tariffs] hurting Tesla on the margin.”
And despite falling behind BYD, Tesla is doing better than expected this summer after a nightmarish start to the year. The company’s shares have rallied after reporting stronger than expected deliveries for the second quarter of 2024. Tesla shares were flat midday Friday, while BYD’s stock price edged up 0.4%.
By the numbers
1 million: How many vehicles Tesla wants to product every year from its German gigafactory
300,000: How many EVs the German gigafactory currently produces a year
200,000: How many EVs BYD would likely produce annually at its Hungary factory
443,956: Tesla EVs sold in the second quarter — a 5% decrease from the year before — compared to BYD’s 426,039 over the same period
21%: How much BYD sales jumped in the second quarter from last year