Analysis on the impact of EU's tariffs on new energy vehicles on aluminum demand

On June 12, local time, the European Commission released a preliminary ruling on the anti-subsidy investigation of electric vehicles in China, and plans to impose temporary anti-subsidy duties on electric vehicles imported from China from July 4. Mysteel combined the export data of new energy vehicles from my country to the EU from 2023 to April this year and the export data of my country's independent car companies to the EU to analyze the impact of tariffs on aluminum demand as follows:

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The number of new energy vehicles exported by my country to the EU from January to April 2024 has decreased year-on-year

In 2023, my country exported 1.7348 million new energy vehicles, an increase of more than 614,000 vehicles year-on-year, and the increase was mainly reflected in Southeast Asia, South America, Oceania and the EU; exports to the EU were about 520,000, accounting for 30.1% of new energy vehicle exports and 5.83% of new energy vehicle production; in 2023, my country's new energy vehicle exports to the EU increased by about 116,700 vehicles year-on-year, accounting for 19% of the increase in new energy vehicle exports.

According to the data, after the European Commission announced in September 2023 that it would launch an anti-subsidy investigation against Chinese automakers, my country's exports of new energy vehicles to the EU have shown a downward trend. From January to April 2024, the number of new energy vehicles exported by my country to the EU decreased by 18.7% year-on-year, but driven by the increase in exports to South America, my country's total exports of new energy vehicles from January to April still increased by 27% year-on-year, and the EU's share of my country's total exports of new energy vehicles also dropped from 30.1% last year to 25.1%.

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China's independent automakers' new energy vehicles account for a limited proportion of exports to the EU

In 2023, my country's exports of new energy vehicles to the EU were 522,400 vehicles, of which China's independent automakers sold 153,280 vehicles to the EU, accounting for nearly 30% of my country's total exports of new energy vehicles to the EU; and the other 70% of exports were contributed by foreign auto brands that built factories in my country, such as Tesla.

From January to April 2024, my country's exports of new energy vehicles to the EU were 165,500 units, down 18.7% year-on-year, accounting for about 22% of my country's total exports of new energy vehicles to the EU, and the proportion also decreased. Among them, from January to April, the sales volume of Chinese independent car companies to the EU was 36,400 units, down 10.79% year-on-year. During this period, SAIC Group accounted for 55.5% of the sales volume of Chinese independent car companies to the EU, BYD accounted for 20.73%, and Geely Automobile accounted for 18.67%.

From the preliminary ruling of the European Commission on the anti-subsidy investigation of electric vehicles in China, Chinese independent car companies are all involved in the imposition of temporary tariffs, and Tesla has obtained the qualification of separate tax calculation, but the EU has not disclosed the specific tax rate.

Note: Anti-subsidy duties are added on top of the current tariffs. It is currently the appeal period, and the specific implementation rate of the temporary tax needs to wait for July 4th to be announced.

According to the EU's Q&A summary, "pre-disclosure is limited to informing the parties of the level of the provisional countervailing duty. Any import tariffs that may be retroactively imposed, if they have been registered 90 days before the implementation of the provisional measures (such as April 5, 2024). Any import tariffs that may be retroactively imposed, if they are 90 days before the implementation of the provisional measures (if the tariffs take effect on July 5, 2024, then retroactive to April 5, 2024), will be dealt with in the later stages of the investigation, and the investigation will determine whether the legal conditions for retroactive taxation are met." This means that considering the impact of tariff retroactivity, it is expected that the year-on-year decline in my country's new energy vehicle exports to the EU after May will be greater than the level in January-April.

In terms of my country's independent car companies, from the perspective of export distribution, China's independent car companies' exports to the EU accounted for nearly 44.5% of their total exports in January-April 2024. The EU is still an important market for China's independent car companies. Chinese car companies have decent export profits and have investment layouts in Europe. As for foreign brands produced in my country, from the data of January to April, the export volume of foreign brands from my country to the EU decreased by 21% year-on-year, which was greater than the 10.79% decrease in exports of my country's independent automakers to the EU. However, my country's exports of new energy vehicles to the EU account for a relatively high proportion of foreign brands. This time, Tesla has obtained the qualification for separate taxation, and the expansion plan of Tesla's Berlin factory has just been approved.

Overall, if the EU's current rules impose temporary anti-subsidy duties on my country's electric vehicles, it is expected that in 2024, my country's electric vehicle exports to the EU will decrease by 100,000 to 130,000 vehicles year-on-year, and the aluminum consumption will be affected by about 20,000 to 30,000 tons.

From the data of my country's new energy vehicle exports from January to April, although the export volume to the EU has decreased, the export volume to South America has increased. From the details, my country's exports of new energy vehicles to Brazil and Mexico from January to April last year were more than 10,000 taels, and from January to April this year, it increased to more than 105,000 taels, which has exceeded the export volume to the above two countries for the whole of last year. Among them, my country's independent automakers exported less than 27,000 tons to them, and more export increases came from foreign brands produced in my country. Therefore, as the total export volume of new energy vehicles in my country is increasing and the penetration rate of new energy vehicles in China is also increasing, the above-mentioned anti-subsidy tax is expected to have limited impact on the demand for aluminum in new energy vehicles and it is difficult to change the growth trend.

On the one hand, it is still in the appeal period. The final EU anti-subsidy tax rate for each company needs to be determined by the final published data. In the current calculated impact, foreign-funded enterprises exporting from my country account for a high proportion, and it is still necessary to pay attention to the anti-subsidy tax rates of these brands. On the other hand, it is only a temporary tax at present. Before the final voting results of EU member states are issued in November, companies only submit deposits. If 15 of the 27 EU member states vote against it, and the population they represent accounts for 65% of the total population of the EU, the tariff cannot be implemented. After the voting results are issued in November, it is also necessary to pay attention to the attitude of the local government towards the current 10% basic tariff and whether there will be plans to increase it.

Overall, many departments have expressed opposition to the EU's imposition of this anti-subsidy tax, and there are also opposition voices within the EU. China still has an advantage in electric vehicle exports, and in addition to its presence in Europe, automakers have investment projects in Southeast Asia, South Asia, South America and other places. As Chinese automakers gradually increase production in overseas factories, the impact of tariffs will gradually decrease.