What stance should fleets take when it comes to the subject of EV tariffs? By Paul Hollick, chair, Association of Fleet Professionals.

AFP chair Paul Hollick

The EU has recently voted to impose tariffs of up to 45% on electric vehicle imports from China. These will added to an existing 10% general tariff.

The arguments for these moves are, in some ways, undeniable. The Chinese government has been handing huge amounts of cash to these companies – BYD has received £3.6bn, for example – giving them a massive commercial advantage over domestic equivalents in Europe. It’s all about trying to create a level playing field.

However, in international trade, nothing is simple and there are fears of retaliations by the Chinese authorities regarding exports of cars sold there. Interestingly, Germany – home of Audi, BMW and Mercedes – abstained from the vote that put these tariffs into place. Furthermore, all of this is given an additional edge by widespread reporting that the Chinese EV market is suffering from huge overcapacity – while, in Europe, EV sales are simply lower than domestic manufacturers were expecting. For both markets, there is some scrabbling to switch back to hybrid production as a transitional move.

Following Brexit, the UK is something of a minor bystander to this but, with its own domestic manufacturers to protect – BMW, Mini, Jaguar Land Rover, Nissan, Stellantis, Toyota and others – there could well be growing a discussion about whether to follow suit. So far, Labour has said that there are no plans to do so and the UK motor industry has been quiet on the subject. Instead, as new EV sales continue to increase more slowly than once thought, industry talk is instead about the ZEV mandate and cutting VAT on new EVs.

What this stance could create is an interesting situation where the UK becomes something of a testbed for allowing cheap imports of Chinese EVs while just across the Channel, protectionism will ensure that as a whole, prices are higher.

At a crossroads

How should fleets respond to this situation, if at all? Certainly, some like to support the UK motor industry where they can. Although few have 1970s-style ‘Buy British’ purchasing policies – and we’re not generally known for unquestioning loyalty to local manufacturers. However, it’s certainly possible that if there was a widespread perception that buying Chinese EVs was directly damaging our domestic base, some fleets may modify their purchasing, however informally. This is complicated by the fact that some familiar European manufacturers, such as Volvo, are now Chinese-owned, and several others make cars in China.

Balanced against this is the possibility that some of the EVs that soon make their way to the UK may be very cheap indeed and the market certainly needs cheaper EVs to stimulate wider acceptance. So far, what we have largely seen from Chinese EV makers here is what could be described as keen pricing but as international competition increases, there could be a temptation for some to dump stock in our non-EU tariff market.

There are other considerations. The Chinese motor industry appears to be on the brink of a quite dramatic cull. The research company Marklines has said that out of a current 50 or so Chinese EV manufacturers, only 10-12 will be making vehicles on a large scale by the end of the decade. The recent insolvency of Hi Phi could be the thin end of a sizeable wedge.

What these developments mean to fleets is that it’s not always easy to know which manufacturers are here for the long term. Some, such as MG/SAIC and BYD, look like safe bets, but when it comes to other, middle rank players, it’s much more difficult to tell.

Drawing conclusions from all of this is difficult. Will the EU tariff approach prove best? Will the UK non-intervention stance be more productive? Which Chinese manufacturers will come to play a sizeable part here and which European manufacturers will be damaged or lost in the fallout? All of these questions are sizeable debates in themselves.