A surprising proposal from the EU for Chinese electric cars – The stock market reacted immediately

Chinese electric car manufacturers received a clear boost on the stock market on Tuesday, when the European Commission announced that it is considering replacing import duties with a new minimum price system. The change could improve margins for Chinese manufacturers and support sales growth in Europe.

The market reaction was immediate. Electric car giant BYD’s stock rose up to 4.8 percent on the Hong Kong stock exchange. Xpeng’s share gained 5.3 percent and SAIC Motor’s share rose 3.6 percent in Shanghai.

According to the plan outlined on Monday, the new system would replace import duties imposed in 2024, which have been as high as 35 percent. In the plan, Chinese car manufacturers would submit a proposal to the commission on minimum import prices, annual quotas and future investments in the region. The Commission would evaluate the proposals on a case-by-case basis.

A constructive step

Analysts are cautiously positive about the proposal.

“Overall, this should be positive for the development of relations between the EU and Chinese car manufacturers. It could also enable Volkswagen and other European manufacturers to use China as an export hub for electric cars,” said Macquarie Capital’s head of China equity strategy Eugene Hsiao.

However, Hsiao points out that the news could be a double-edged sword for Chinese companies, which have already launched large-scale projects to localize production to Europe to avoid tariffs. The minimum price system should be flexible in order to take into account different car models and vehicle classes.

The investment bank Morgan Stanley also considers the turn positive.

“We are still waiting for details, but we see this as a constructive sign for the expansion of Chinese EV sales in Europe. Key players such as BYD, SAIC and Geely will benefit from this,” the bank’s analysts wrote in a review.

In the background is the threat of a trade war

The EU wants to soften trade relations with China, as tensions with the United States are intensifying due to the actions of President Donald Trump. At the same time, however, the Union must protect its own car industry, which faces stiff competition from cheap Chinese electric car brands.

China exported 579,000 fully electric cars to Europe in the first 11 months of 2025. BYD, SAIC and Geely each accounted for around 10-15 percent of exports.

The price difference has been a significant competitive advantage. According to Morgan Stanley’s estimates, the average price of Chinese-made electric cars in Europe was around 25,000 euros last year, while the average of all imported electric cars was around 30,000 euros.

The EU imposed the initial additional tariffs after a year-long investigation that found Chinese manufacturers were receiving an unfair competitive advantage from government subsidies. China responded to the tariffs by targeting European dairy, pork and brandy industries. Negotiations to avoid a full-scale trade war have continued since then.

Source: Bloomberg

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