U.S. Tariffs Make Chinese Auto Stocks Nosedive, but Analysts More Sanguine

[para. 1] The share prices of Chinese auto companies saw a significant decline after China announced retaliatory tariffs in response to tariffs introduced by then-U.S. President Trump. Despite the fall in stocks, analysts expressed confidence that the impact on China's auto industry from these tariffs would be manageable.

[para. 2] Major automotive firms experienced sharp declines, with BYD Co. Ltd. falling by 10%, Contemporary Amperex Technology Co. Ltd. plummeting by 11.46%, and Geely Automobile Holdings Ltd. declining by 20.97%.

[para. 3][para. 4] An automotive industry analyst highlighted that China exported 107,000 vehicles to the U.S. in 2024, marking a 58.1% increase from the previous year. A large portion of these exports came from General Motors and Ford through their joint ventures in China, while the remaining were primarily electric vehicles (EVs) from companies like Polestar and Lotus.

[para. 5] The U.S. administration previously imposed a 100% tariff on Chinese EVs and a 25% tariff on batteries starting in late 2024, impacting exports significantly. Because of these tariffs, exporting vehicles from China to the U.S. has become non-economical, affecting major automakers like General Motors and Ford.

[para. 6][para. 7] U.S. tariffs on Chinese cars and parts, previously set at 25% from 2018, increased drastically, reaching 72.5% for gasoline cars and 147.5% for EVs. As a potential workaround, some Chinese manufacturers considered setting up operations in Mexico to bypass these tariffs under NAFTA. However, the Trump administration's announcement of a blanket 25% tariff on imports has raised concerns over these plans.

[para. 8] An anonymous securities analyst mentioned that while relocating production could present some opportunities, the unpredictable nature of U.S. trade policies presents inherent risks in pursuing overseas expansion.

[para. 9] Geopolitical tensions further complicate matters, with China's Ministry of Commerce postponing the approval of BYD’s planned Mexican facility due to security concerns.

[para. 10][para. 11] While auto parts manufacturers face lesser direct impacts, the increased tariffs still pose challenges. Data indicates China exported $17.15 billion worth of auto parts to the U.S. in 2024. There are strategies in play where U.S. automakers might absorb some tariff costs, and Chinese suppliers may reroute exports through different facilities.

[para. 12][para. 13] In retaliation, China announced a 34% tariff on U.S.-made goods, including automobiles and parts. This led to a reduction in Chinese imports of U.S. vehicles by 14% in 2024 and a drastic 66% drop in the first two months of 2025. German car manufacturers like Mercedes-Benz and BMW, which export from U.S. facilities to China, are significantly impacted by this move.

[para. 14] Despite these challenges, the broader impact on the American automotive industry is limited since many vehicles, like those from Tesla, Ford, and GM, are produced locally within China.

[para. 15][para. 16] As an alternative strategy, China eyes enhancing ties with Europe. The Ministry of Commerce conducted discussions with U.S. firms, including Tesla, emphasizing China's commitment to maintaining an open economy and encouraging multilateral trade practices.

[para. 17] The global trade turbulence has led Chinese and U.S. automakers to explore opportunities in other international markets. Companies like CATL offer licensing to U.S. partners, and Tesla has operational facilities in China.

[para. 18][para. 19] In a related development, the European Union imposed a five-year anti-subsidy tariff on Chinese EVs, and diplomatic conversations are ongoing to address these issues. China is actively engaged in dialogue with the EU to resolve trade disputes related to pricing and export volumes of Chinese EVs.

[para. 20][para. 21] Top officials from China and the EU recently initiated dialogue to address the EU's anti-subsidy tariffs, showing mutual interest in maintaining open markets and fair competition.

[para. 22] For more details, contact reporter Denise Jia at huijuanjia@caixin.com.