Xpeng president says Chinese EV firm remains committed to Europe despite pressure from tariffs
Chinese electric vehicle maker Xpeng remains committed to Europe for the long term despite pressure it faces from the European Union’s tariffs, according to a top company official.
“Our plan for Europe is a very long term one,” Brian Gu, Xpeng’s vice chairman and co-president, told CNBC’s Charlotte Reed Monday at the Paris Motor Show.
Reflecting on the EU’s decision to adopt higher tariffs on Chinese EV imports, Gu said that this has put “a lot of pressure” on its business model.
However, he added that the firm has a “long-term focus” in the continent and is aiming to “find every possible way to address and make ourselves competitive.”
Gu said that Xpeng is currently reviewing multiple aspects of its business strategy — including product range, business model and pricing — as it evaluates the impact of EU tariffs.
He didn’t confirm whether Xpeng plans to pass the costs of tariffs on to its customers.
“There’s a number of areas we are looking at, examining, [and] trying to optimize,” he said.
Longer term, Gu said that Xpeng plans to become “more local” in Europe, ramping up its manufacturing capabilities in the region.
“Having local manufacturing capabilities is something a company with a long-term plan and a long-term vision has to do, It’s not because of tariffs, it’s not because of short-term policy changes,” Gu told CNBC.
Earlier this month the EU voted to adopt definitive tariffs on imports of China-made battery electric vehicles. The development was a major blow to the Chinese EV industry, which has been making significant inroads into Europe over the last several years.
The EU first announced it would slap higher tariffs on Chinese electric vehicle imports in June. At the time, the bloc said that China’s firms benefit “heavily from unfair subsidies” and pose a “threat of economic injury” to EV producers in Europe.
Duties were also disclosed for individual companies, depending on the extent of their cooperation with the probe. Provisional duties were put in place from early July, but were revised in September based on “substantiated comments on the provisional measures” from interested parties.
Tesla, which had voiced concerns at the rate of tariffs proposed for its China-made EVs, saw its proposed tariff lowered from as much as 20.8% to 7.8%.
More costs for the industry
Gu’s comments are more tame than some of his peers in the Chinese EV industry. On Monday, Stella Li, executive vice president of Warren Buffett-backed EV firm BYD, said the EU’s planned tariffs on Chinese-made EVs were based on incorrect calculations. She added that the decision was unfair.
“Politicians should stay away from tariffs, adding more cost to auto manufacturing and confusing the auto industry,” she said, in comments reported by Reuters from the Paris Motor Show.
Last month Chinese EV maker Nio’s CEO and founder William Li also criticized the EU tariffs, saying on a company earnings call that the duties were “unreasonable” and go against the “sustainable development of all humankind.”
The U.S. has also expressed concerns over the influence China has on the EV market. In May, the Biden administration introduced a 100% tariff on Chinese-made electric vehicle imports to the U.S.
Among the top concerns the Biden administration has expressed about China’s EV industry is that it’s helping companies overproduce cheap clean energy vehicles that outpace domestic demand, effectively distorting the market.
In response to the EU tariffs, the China Chamber of Commerce to the EU has previously expressed “deep disappointment” with what it called the bloc’s “adoption of protectionist trade measures.”
Technology
Tesla’s Model Y debuts in India priced at a hefty $70,000 as the EV maker ‘tests the waters’
In this photo illustration, logo of Tesla is displayed on a mobile phone screen in front of the Indian flag in Ankara, Turkiye on November 28, 2023.
Cem Genco | Anadolu | Getty Images
Tesla has made its long-awaited debut in India, where it will sell its electric SUV, the Model Y, starting at $69,770, a significant markup from other major markets, its website showed Tuesday.
The sales launch comes the same day the American electric vehicle maker opened a showroom in Mumbai, its first in the country.
Isabel Fan, Southeast Asia Director at Tesla, also announced that the company would soon launch a showroom in the Indian capital of New Delhi, according to a report from CNBC-TV18.
The report added that Tesla would hire staff locally and set up experience centers, service centers, delivery systems, charging stations and logistics hubs throughout the country.
There has long been speculation about when Tesla would enter India, the third-largest automotive market in the world by sales. However, the high price tag may come as a surprise to many. For example, the Model Y starts from $44,990 in the U.S.
Why are prices so high?
Vaibhav Taneja, Tesla’s Chief Financial Officer, in April, confirmed the company’s interest in India but said it would take a careful approach to the market considering its 70% tariff on EV imports and about 30% luxury tax.
These high taxes explain why Tesla was forced to set its prices so high in India, despite the country’s preference for EVs at much lower price ranges.
Experts told CNBC that this will see Tesla in India compete in the premium segment of the market with the likes of BMW, rather than with local EV companies like Tata Motors.
“I won’t say that these prices are completely out of range because you will find buyers in India for all price points,” Vivek Vaidya, global client leader for mobility at research firm Frost & Sullivan, told CNBC’s “Inside India” on Tuesday.
“The question is whether they are going to threaten the mass market. The answer to that is no because the most popular selling cars probably sell at one-tenth of this price,” he added.
Testing the waters
While the Model Y will struggle to be price competitive, Tesla is likely more focused on “testing the waters” than generating sales in India, Puneet Gupta, Director for the Indian automotive market at S&P Global Mobility, told CNBC.
India first announced a new EV policy last year that promised to reduce duties for companies that commit to building up a local supply chain. While this could help Tesla push its prices down, the company has yet to commit to building any local manufacturing plants in India.
“The Mumbai showroom is a strategic ‘soft power’ move, not a full commitment,” Diwakar Murugan, automotives analyst at Canalys, told CNBC in a statement, adding that Tesla’s hesitation in India is pragmatic, as the market still lacks the demand to justify a large-scale manufacturing facility.
“Shifting a significant portion of its production to India would require a major re-evaluation of its global manufacturing strategy, something it’s not ready to do while its primary focus remains on scaling production in its established markets,” he said.
Murugan predicted that Tesla may only commit to full-scale Indian manufacturing between 2028 and 2030, with incentives like land subsidies and tax holidays, as well as the maturity of the local battery market expected to be important factors.
In the meantime, the Model Y will be a “niche, limited-volume product for wealthy, tech-savvy early adopters who seek a status symbol,” he added.
S&P’s Gupta noted that India’s tariffs on EV exports could also soon change as a result of ongoing trade negotiations between Washington and New Delhi, as well as further tweaks to its EV policy.
Tesla CEO Elon Musk spoke with India’s Prime Minister Narendra Modi on topics including collaboration on technology and innovation in April.
“The Indian government has been very proactive in terms of pushing green, cleaner, electric cars, and I think that Tesla has a clear advantage due to the India-U.S. relationship,” Gupta said.
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