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EU Tariffs Unlikely to Deter Chinese EV Makers from Expanding in Europe

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Despite the European Union’s new tariffs on Chinese electric vehicles (EVs), Chinese automakers remain well-positioned to expand in the European market. Recent revisions have slightly reduced the tariffs, with BYD seeing a cut to 17% from 17.4%, Geely to 19.3% from 19.9%, and SAIC from 37.6% to 36.3%.

Research by Rhodium suggests that tariffs would need to be as high as 50% to make Europe unattractive to Chinese EV exporters, and potentially even higher for vertically integrated manufacturers like BYD. At their current levels, these tariffs will not significantly hinder Chinese EV manufacturers from entering the European market. Joseph McCabe, president and CEO of AutoForecast Solutions, noted that while the tariffs introduce hurdles, they do not act as barriers, given the strong interconnections between European and Chinese original equipment manufacturers (OEMs).

In contrast to the EU, North America has taken a more aggressive stance, with the U.S. imposing a 100% tariff on Chinese EVs, followed by a similar move from Canada. McCabe highlighted that the EU is attempting to balance promoting domestic production without severely impacting its interconnected Chinese operations.

Chinese automakers, particularly BYD, are also targeting the European market with competitively priced models. In May, BYD announced its Dolphin model, priced at under $21,550—significantly cheaper than Tesla’s China-imported Model 3, which faces a 9% tariff and sells for $44,480 in the UK. Even with the EU’s 17% tariff, the Dolphin remains about $23,270 cheaper than Tesla’s Model 3.

To compete, Volkswagen plans to release a low-cost electric vehicle priced similarly to BYD’s offerings by 2027. However, McCabe noted that new, innovative EV players are often valued more for their potential than short-term financial performance, which is the focus for legacy manufacturers like Volkswagen.

William Ma, CIO of GROW Investment Group, pointed out that tariffs would need to rise to 300% to significantly impact Chinese EV makers, which is unlikely. The risk of retaliatory tariffs from China also complicates the EU’s approach, especially given ongoing tensions over perceived unfair subsidies for Chinese EV manufacturers.

Ma suggested that geopolitical factors and sanctions could persist for another year or two, making the situation difficult to resolve in the short term.

 

Moderna Stock Plummets 20% After Lowering Guidance on EU Sales and U.S. Vaccine Market Challenges

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Moderna experienced a significant 20% drop in its stock price on Thursday after reporting second-quarter results that, while beating revenue expectations, prompted the company to sharply reduce its full-year sales forecast. The biotech firm now anticipates 2024 product revenue between $3 billion and $3.5 billion, down from its previous estimate of $4 billion.

The revised guidance is attributed to lower-than-expected sales in Europe, heightened competition in the U.S. vaccine market, and potential delays in international revenue. Moderna’s newly approved respiratory syncytial virus (RSV) vaccine, mRESVIA, began shipping in the U.S., but faces stiff competition from existing RSV vaccines by Pfizer and GSK.

Moderna CEO Stephane Bancel highlighted the increased competition for both RSV and Covid vaccines and noted difficulties in securing new contracts with European governments due to tight budgets and existing agreements with Pfizer and BioNTech. The ongoing conflict in Ukraine is also putting strain on government finances.

Despite the current challenges, Bancel expressed optimism for a recovery, projecting sales growth in 2025 and a break-even point by 2026, driven by new product launches.

For the second quarter, Moderna reported:

  • Loss per share: $3.33, better than the expected loss of $3.39
  • Revenue: $241 million, exceeding the $132 million forecast

Revenue from Moderna’s Covid vaccine fell 37% year-over-year, contributing to the company’s net loss of $1.28 billion. However, Moderna achieved a reduction in costs, including a significant drop in sales expenses and a 19% decrease in selling, general, and administrative costs. R&D expenses rose by 6% to $1.2 billion due to increased personnel costs.

Despite these setbacks, Moderna’s stock has risen nearly 20% this year, reflecting confidence in its pipeline and messenger RNA technology. The company is advancing 45 products in development, including a combination vaccine for Covid and flu, and a personalized cancer vaccine with Merck.