China has rapidly electrified its auto market, which is by far the largest auto market in the world. The country accounts for about half of the world’s electric vehicle sales, and 63% of the country’s auto sales were plugin vehicles last month. As the market has ramped up and gotten to completely unmatched volumes, it has driven down per-unit costs. Additionally, fighting for market share and continued growth, the whole industry got into an EV price war last year. As a result of all of the above, Chinese EVs have gotten much cheaper than EVs developed and produced in other regions. Like all other big auto countries, China and its state governments have supported the auto industry in various ways. As a response to the threat of cheap Chinese EVs wiping out a big portion of the European auto industry, and using the argument that Chinese EVs were too heavily subsidized by the government, the European Union (EU) put high tariffs on EVs produced in China last year. There’s been an easily predicted side effect of these tariffs, though. The tariffs are only on fully electric models, not plug-in hybrids. As a result, aside from Chinese automakers setting up EV factories in Europe, they are sending more and more plug-in hybrids — the close cousins of full electrics — to Europe and growing their sales and market share. It was always a little bewildering why the EU would put tariffs on BEVs but not PHEVs. PHEVs were supported nearly the same as BEVs, and they were surely going to be prioritized for sales in Europe if BEVs were slapped with tariffs. Now, though, the EU is wising up. Reportedly, the EU is now looking to put tariffs on PHEVs produced in China. That seems all but inevitable, but we’ll see what happens and how long it takes.
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