China's EV maker's weak response to EU proves costly in tariff dispute

By Bloomberg News

SAIC Motor Corp.’s harsh treatment by European Union negotiators is becoming a cautionary tale of Chinese companies being ill-equipped to operate in Western business and political domains.
 

Of the three Chinese automakers singled out by the EU, SAIC has been subjected to an extra 36.3 per cent tariff on the EVs it sells in Europe. That’s more than twice BYD Co., which will pay an additional 17 per cent on top of existing customs duties of 10 per cent. Volvo Car AB parent Zhejiang Geely Holding Group Co. is in the middle with an added charge of 19.3 per cent. The proposed tariffs were revised down slightly last Tuesday.

 

The main factor driving the uneven treatment appears to be varying “levels of cooperation,” the European Commission said in its 208-page provisional decision document posted in July, which included a detailed part just for SAIC. In particular, the Shanghai-owned carmaker’s responses were “found to be highly deficient,” it said.

For its part, SAIC was concerned about the security of its information and also simply lacked access to some of its own suppliers’ data, people familiar with the matter said, asking not to be identified discussing confidential matters. An unfamiliarity with the required documentation as well as internal bureaucracy were other challenges, the people added.

Representatives for SAIC, best known outside China for its MG models, didn’t respond to a request for comment. But the automaker said in a social media post last month that the EU had requested sensitive business information, such as providing the chemical formula it uses in batteries, which it said was out of the scope of the investigation.

SAIC’s scant response to the EU was at odds with peers BYD and Geely, which pro-actively engaged international law firms and conducted thorough data collection, and in BYD’s case, hired policy experts in Brussels, one of the people said.

“Look at the different automakers and where they fall in terms of the degree of tariffs and it’s almost like a road map to tell you who’s better at local public relations or government lobbying,” said Stephen Dyer, managing director at consulting firm AlixPartners. One factor may be a manufacturer’s openness to embrace business cultural differences and their ability to adapt, he said.

It’s further evidence that while Chinese EV makers are capturing an impressive share of the continent’s car market, they’re not displaying the same prowess when it comes to intangible influence that powerful companies usually wield — like navigating the delicate dance with EU negotiators, or even comparatively trivial things like making their voices heard at global auto shows, prime networking ground for industry executives.

The fact that state-owned enterprises in China have multiple objectives other than just profit tends to make them less agile in these situations, Dyer said. There’s a danger with Chinese companies assuming that everything is political and hence feeling that it’s meaningless to cooperate, he added.

Given it’s unrealistic for Chinese EV makers to abandon their plans to expand in Europe, better engagement with Europe’s civil society and regulatory systems would help, said Gregor Sebastian, a senior analyst with Rhodium Group. Some Chinese firms may have underestimated the political and legal challenges related to entering the EU market and not put enough resources into it, he said.

The disconnect was on display at The Battery Show Europe 2024, a trade event to showcase the latest in cell design and engineering. So prevalent were Chinese companies that they accounted for more than one-fifth of total exhibitors at the Stuttgart event in late June. 

Yet during the three-day seminar that ran in parallel, almost no Chinese speakers shared the stage with the scores of white, mostly male auto executives because they mostly declined invitations to speak.

Chinese manufacturers will take time to adapt to their new cultural surroundings, including press requests, advertising and membership of industry associations, Jochen Siebert, managing director at consultancy JSC Automotive, said. They still lack an understanding of the importance of local reporters and reviewers, for example, who play a substantial role in swaying consumers in Europe, he said.

Even BYD, which got the lowest of the proposed tariffs, isn’t getting its approach 100 per cent right. Its European website now patiently explains that NEV stands not for ‘neighborhood electric vehicle’ but ‘new energy vehicle’ after public confusion following the carmaker’s sponsorship of the UEFA European Football Championship 2024 where the term NEV was used widely in marketing materials.

It’s nevertheless paying at least more attention to an area largely ignored by its long-time local rivals. 

“It’s the old story — if you and your friends are being chased by a tiger, you don’t need to run faster than the tiger,” Dyer said. “You simply need to run faster than your friend.”