The recent imposition of tariffs by the US (planned) and the EU (EU imposed from 17 to 38 per cent tariffs) on Chinese electric vehicles (EVs) signals concerns about the competitive threat posed by the Asian giant’s manufacturers and these curbs could mean China dumping its EVs in India at unbelievably low prices.
These tariffs, especially the substantial increases announced by President Joe Biden, aim to shield domestic auto industries from the surge of affordable Chinese EVs into the US.
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| With the EU tariff, total import duties on Chinese EVs to Europe could touch a whopping 50 per cent. |
However, this move raises questions about whether India may become a destination for dumping these vehicles, as it has historically been so for other rejected Chinese products.
China’s EV dominance and global concerns
China’s dominance in the EV sector is significant. Through strategic investments in research and development (R&D) and via a slew of subsidies, China has established itself as a leader in EV manufacturing.
With control over critical components like lithium-ion batteries, China poses a challenge to global competitors.
This dominance has prompted countries like India to chart a strategy to compete effectively while safeguarding its domestic markets.
India’s growing EV market
India’s EV market, although small, is surging rapidly. Tata Motors currently leads the Indian market, with emerging players such as Mahindra & Mahindra, BYD, and MG Motor gaining ground.
The possible entry of global giants like Tesla and initiatives by Indian companies like Reliance, Ola, and Exide to set up EV battery manufacturing units indicate the growing potential of the Indian EV ecosystem.
Geopolitical tensions with China
Geopolitical tensions between India and China add another layer of complexity to the business situation.
The Narendra Modi-led Indian government has implemented regulations to scrutinise foreign investments, especially those with potential links to China and Pakistan, to safeguard national security interests.
With this cautious approach, the central government had blocked BYD's attempt to set up a factory in India in 2023.
Regulatory measures and market opportunities
The central government’s regulatory measures aim to prevent the influx of cheap Chinese EVs into the Indian market.
By scrutinising foreign investments and safeguarding national security interests, India is protecting its domestic industries while allowing a competitive EV market.
Despite these challenges, India’s EV market is poised for a rapid surge, with projections suggesting that EV sales could constitute a significant portion (30 per cent) of the total passenger vehicle sales by 2030.
Concerns about China’s EV dominance
The imposition of tariffs on Chinese EVs by the US and the EU reflects global concerns about China’s EV dominance.
While these tariffs aim to protect domestic industries, they also raise questions about the impact on other markets such as India.
India’s EV market is growing rapidly, presenting opportunities for both domestic and international players.
However, geopolitical tensions with China add complexity to the situation.
Even as India may open up for other global markets with a liberal EV policy under Narendra Modi 3.0, the same stance towards China may lead to the dumping of cheap Chinese EVs in India.
E-Vroooom’s views
So, protective tariffs on Chinese electric vehicles by the US and EU may force China to dump its EVs in the Indian market in a manner that prices of these EVs will be way below that of Indian electric cars, and this may prompt a price rethink by Indian car manufacturers.
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