BYD sees bigger profits on some EVs sold in the EU than in China, even with tariffs

Published

5 months ago

June 13, 2024

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After the EU announced new tariffs on Chinese EV imports, BYD is subject to an additional 17.4% duty. However, with BYD reportedly generating higher EV profits on models like the Seal U in the EU than in China, the EV leader is expected to overcome the impact.

BYD announced it would enter the European car market in 2020. After launching in Norway in 2021, BYD showcased its EV lineup, including the Atto 3, Han, and Tang models.

Since then, BYD has strategically expanded in the region, adding models like the Dolphin and Seal. Last year, the Atto 3 was BYD’s best-selling EV in Europe, with 12,363 models sold. It was followed by the Dolphin (1,079), Tang (1,055), and Han (849).

However, BYD sees sales accelerating over the next few years after learning more about the EU market.

The high expectations come despite new EU tariffs on imported EVs from China. After global markets became “flooded with cheaper electric cars” from China, EU Commission President Ursula von Der Leyen announced an investigation in October.

After finding that Chinese EVs benefit from “unfair subsidization,” the EU pre-disclosed additional tariffs that it plans to impose on automakers this week.

BYD EV profits are still higher in the EU with tariffs

The additional Tariff for BYD is 17.4%. If no other resolution is found, it will be applied on July 4, 2024.

Meanwhile, recent research from Rhodium Group shows the tariffs may not be enough to slow BYD and other Chinese EV makers from gaining market share.

According to the study, duties in the 40 to 50% range, or even higher, would likely be needed to slow the momentum.

An increasingly competitive Chinese market has led to aggressive price cuts. As a result, many electric cars sell for much more in the EU than in China. And it’s not just Chinese automakers.

Volkswagen’s ID.4 sells for around 50% more (46,335 euro vs 31,011 euro) in Europe than in China. BYD’s Seal U (Comfort) costs nearly 93% more (41,990 euro vs 21,769 euro). The same goes for other popular models like the BYD Atto 3 (+112%) and Volkswagen ID.3 (57%).

According to Rhodium’s price analysis, BYD makes around 14,300 euros ($15,360) on each Seal U model sold in the EU. In China, BYD earns a profit of 1,300 euros ($1,400) for each model sold.

Based on MSRPs (after shipping, tariffs, distribution, and VAT), BYD earns 13,000 euros ($14,000) more on every Seal U model sold in the EU (the “EU premium).

The EU would need to drastically increase tariffs to reduce the incentive to export. Even a 30% duty would leave BYD with a 15% profit, or 4,700 euros ($5,050) compared to China.

Tariffs around 45% to 55% might be needed to lower profits. However, it would also likely hurt foreign automakers even more, such as BMW and Tesla, which export from China.

BYD’s CEO, Wang Chuanfu, called the US and Europe “afraid” of Chinese EVs last week. “If you are not strong enough, they will not be afraid of you,” he added.

Wang said the tariffs are a testament to China’s auto industry strength. With BYD’s first factory in Europe set to begin production later this year, the EV maker expects to overcome the potential impacts of higher tariffs.

Source: CarNewsChina, Rhodium Group

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Environment

Elon Musk Tapped to Lead New ‘DOGE’ Department—Despite the Government Already Having One for Efficiency

Published

3 hours ago

November 13, 2024

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Elon Musk Tapped to Lead New ‘DOGE’ Department—Despite the Government Already Having One for Efficiency

Tesla CEO Elon Musk is to officially join Trump’s administration as the co-head of the new US Department of Government Efficiency – a second federal department with the goal of making government spending more efficient.

You can’t get more ironic than that.

Throughout the elections, Musk, who is already CEO of Tesla, and SpaceX, a well as the defacto head of X, xAI, Neuralink, and the Boring Company, has been floating the idea to add to his workload by joining the Trump’s administration to lead a new department aimed at making the federal government more efficient.

He has been calling it the “Department of Government Efficiency”, which spells out ‘DOGE’, a meme that Musk appears to enjoy.

Well, now Trump appears to want to be going through with this idea.

He announced the new department and Musk as head, along with Vivek Ramaswamy, in a statement today:

I am pleased to announce that the Great Elon Musk, working in conjunction with American Patriot Vivek Ramaswamy, will lead the Department of Government Efficiency (“DOGE”). Together, these two wonderful Americans will pave the way for my Administration to dismantle Government Bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure Federal Agencies – Essential to the “Save America” Movement. “This will send shockwaves through the system, and anyone involved in Government waste, which is a lot of people!” stated Mr. Musk.

What’s most ironic is that there’s already a federal department with the goal of cutting government waste and ensuring efficiency: the Government Accountability Office (GAO).

The GAO’s main objectives are:

auditing agency operations to determine whether federal funds are being spent efficiently and effectively;
investigating allegations of illegal and improper activities;
reporting on how well government programs and policies are meeting their objectives;
performing policy analyses and outlining options for congressional consideration;
issuing legal decisions and opinions;
advising Congress and the heads of executive agencies about ways to make government more efficient and effective

It sounds similar to what Musk described when talking about his DOGE, but Trump hasn’t gone into many details other than it will “cut waste.”

He also has a confusing message as he compares the initiative, which is supposed to cut government spending, to “The Manhattan project”, a massive and expensive government project.

Trump said that DOGE will help the government “drive large scale structural reform”:

It will become, potentially, “The Manhattan Project” of our time. Republican politicians have dreamed about the objectives of “DOGE” for a very long time. To drive this kind of drastic change, the Department of Government Efficiency will provide advice and guidance from outside of Government, and will partner with the White House and Office of Management & Budget to drive large scale structural reform, and create an entrepreneurial approach to Government never seen before.

The statement also noted that DOGE will only operate until July 4, 2026.

Musk has previously claimed that he could cut at least $2 trillion dollars of the $6.5 trillion dollar US federal budget.

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Environment

Oil could plunge to $40 in 2025 if OPEC unwinds voluntary production cuts, analysts say

Published

4 hours ago

November 13, 2024

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Oil could plunge to in 2025 if OPEC unwinds voluntary production cuts, analysts say

A pump jack in Midland, Texas, US, on Thursday, Oct. 3, 2024.

Anthony Prieto | Bloomberg | Getty Images

Oil prices may see a drastic fall in the event that oil alliance OPEC+ unwinds its existing output cuts, said market watchers who are predicting a bearish year ahead for crude.

“There is more fear about 2025’s oil prices than there has been since years — any year I can remember, since the Arab Spring,” said Tom Kloza, global head of energy analysis at OPIS, an oil price reporting agency.

“You could get down to $30 or $40 a barrel if OPEC unwound and didn’t have any kind of real agreement to rein in production. They’ve seen their market share really dwindle through the years,” Kloza added.

A decline to $40 a barrel would mean around a 40% erasure of current crude prices. Global benchmark Brent is currently trading at $72 a barrel, while U.S. West Texas Intermediate futures are around $68 per barrel.

Oil prices year-to-date

Given that oil demand growth next year probably won’t be much more than 1 million barrels a day, a full unwinding of OPEC+ supply cuts in 2025 would “undoubtedly see a very steep slide in crude prices, possibly toward $40 a barrel,” Henning Gloystein, head of energy, climate and resources at Eurasia Group, told CNBC.

Similarly, MST Marquee’s senior energy analyst Saul Kavonic posited that should OPEC+ unwind cuts without regard to demand, it would “effectively amount to a price war over market share that could send oil to lows not seen since Covid.”

However, the alliance is more likely to opt for a gradual unwinding early next year, compared to a full scale and immediate one, the analysts said.

Should the producers group proceed with their production plan, the market surplus could nearly double.

Martoccia Francesco

Energy strategist at Citi

The oil cartel has been exercising discipline in maintaining its voluntary output cuts, to the point of extending them.

In September, OPEC+ postponed plans to begin gradually rolling back on the 2.2 million barrels per day of voluntary cuts by two months in an effort to stem the slide of oil prices. The 2.2 million bpd cut, which was implemented over the second and third quarters, had been due to expire at the end of September.

At the start of this month, the oil cartel again decided to delay the planned oil output increase by another month to the end of December.

Oil prices have been weighed by a sluggish post-Covid recovery in demand from China, the world’s second-largest economy and leading crude oil importer. In its monthly report released Tuesday, OPEC lowered its 2025 global oil demand growth forecast from 1.6 million barrels per day to 1.5 million barrels per day.

The pressured prices were also conflagrated by a perceivably oversupplied market, especially as key oil producers outside the OPEC alliance like the U.S., Canada, Guyana and Brazil are also planning to add supply, Gloystein highlighted.

Bearish year ahead for oil

The market consensus is that there’ll be a “substantial” oil stock build next year, said Citibank energy strategist Martoccia Francesco.

“Should the producers group proceed with their production plan, the market surplus could nearly double… reaching as much as 1.6 million barrels per day,” said Francesco.

Even if OPEC+ doesn’t unwind the cuts, the future ofl prices is still looking break. Citi analysts expect Brent price to average $60 per barrel next year.

Further fueling the bearish outlook is the incoming administration of U.S. President-elect Donald Trump, whose return is associated by some with a potential trade war, said analysts who spoke to CNBC.

“If we do get a trade war — and a lot of economists think that a trade war is possible, and particularly against China — we could see much, much lower prices,” said OPIS’ Kloza.

Trump has also touted a “drill baby drill” policy for U.S. producers, vowing to cut energy prices in half.

For that to happen to retail gasoline prices, oil would need to drop to “below $40” per barrel, said Matt Smith, Kpler’s lead oil analyst.

Right now, retail gasoline prices are at a “sweet spot” at $3 per gallon, where consumers do not feel the pinch and input prices are still sufficiently high for producers, Smith added.