On 12 June 2024, the EU announced import tariffs on Chinese EVs ranging from 17.4% up to 38.1%. (Earlier post.) The justification for such trade tariffs is an unfair subsidization by the Chinese government, which the Commission claims undermines the domestic (European) automotive industries.

However, Mika Takahashi, Technology Analyst at IDTechEx notes, the executive summary of the European Commission’s “Initiation of an anti-subsidy investigation concerning imports of new battery electric vehicles... originating in the People’s Republic of China” contained an important definition. The statement sets out the Commission’s aims regarding the anti-subsidy investigation and defines the product in question as a battery electric vehicle (BEV) designed for the transport of 9 or less passengers.

The EU has thus defined that it will only investigate anti-subsidy claims for vehicles that carry 9 people or less—namely cars. The importance of the definition “9 or less persons” becomes clear, IDTechEx says, when one realizes that the tariffs thus do not include buses.

The European Commission also claims that Chinese EV cars made up 8% of the market in 2023 and believe that this share was enough to warrant protectionist measures. By contrast, IDTechEx's research report, “Electric and Fuel Cell Buses 2025-2045: Markets, Players, Technologies and Forecasts”, reveals that in 2023, 28% of the European electric bus market was held by Chinese manufacturers.

IDTechEx research highlights the shifting landscape of bus production in Europe. Chinese OEMs share (while down from its peak value) still reached 28%. This is a 3.5x greater market presence than in the electric car market, yet there are no similar tariffs looming for buses. Source: IDTechEx

IDTechEx research indicates that 2023 was the strongest year yet for electric buses in Europe, driven mainly by metropolitan regions ditching diesel buses in favor of cleaner, more efficient, and emission-free alternatives. With more than 5,000 sales in the EU and UK, the market has been steadily growing since 2013.

However, this number pales in comparison to the best year of the Chinese electric bus market, where almost 140,000 vehicles were sold in 2016. The reasons behind the Chinese successes are explored in detail in IDTechEx’s report, but fundamentally, strong government subsidies coupled with an industry ready to switch to electric has resulted in China being decades ahead in terms of electric bus adoption.

European bus OEMs have been slow to adapt, with many manufacturers reluctant to abandon their decades-old heritage of combustion engines. Some major OEMs did not have electric buses in production until as late as 2019. However, this late development has not been reflected in the appetite for the market, as cities are now adopting emission-free zones and ambitious decarbonization targets. This market with high demand but low interest from European OEMs has been combined with a third factor to ensure the success of Chinese electric buses—a slowdown in domestic demand in China.

As the report shows, sales within China have been decreasing since the 2016 peak, primarily due to an ending of subsidies, but also a saturation of key tier-1 cities. This has left major players such as BYD and Yutong searching for new markets to export their products to, and Europe tops the list.

In short, says IDTechEx, the absence of tariffs will mean more Chinese electric buses in Europe. The bus market is a highly price sensitive industry, with operators’ decisions regarding their fleet almost entirely decided by economics. Chinese manufacturers have been manufacturing electric buses at full production scale for well over a decade now, and this allows them to lower costs through economies of scale. The centralization of the entire production process in China also allows savings in battery costs (the most expensive part of an electric bus) to be leveraged by the manufacturers to produce a cheaper product. It is arguable that even with tariffs, Chinese buses would still flourish due to the growing market opportunities and difficulties of domestic OEMs. However, the absence of any such tariffs is likely to only further cement Chinese electric buses’ position in the market.

Even if tariffs were to come in, factories are springing up across the continent to produce Chinese buses in Europe. BYD has established a factory in Hungary under its philosophy of built in Europe, for Europe. Major battery supplier CATL is also building a plant in Hungary, with Yutong planning on procuring modules in Europe from this factory. Chinese influence is growing beyond just the badge front grille of the bus. IDTechEx’s report highlights the latest developments in the fast-changing supply relationships in the bus industry, and the presence of Chinese battery pack suppliers to European bus makers is strong, particularly from the world leader in Li-ion batteries, CATL.

The outlook for European OEMs. The challenge facing European OEMs can be exemplified by a 2024 €43-million order for 92 BYD buses from Belgian transit company De Lijn. This was a damaging loss to local manufacturers Van Hool and VDL Bus & Coach, which have invested heavily in electric bus production. Just a few months later, Van Hool would file for bankruptcy, and a VDL spokesperson urged action from the Commission, claiming that BYD is heavily subsidized and that the playing field is uneven.

The European bus market is still at an early stage, and that means much could yet change. IDTechEx research has shown that the market share of Chinese OEMs was down in 2023 when compared with 2022, driven by a surge in German sales. MAN Bus & Truck and Mercedez experienced their strongest electric bus sales to date, with MAN even topping the manufacturer rankings of sales with a 16% market share, as shown in IDTechEx’s report, “Electric and Fuel Cell Buses 2025-2045: Markets, Players, Technologies and Forecasts”.

So, have the Europeans finally caught up? 2023 saw mixed fortunes in the German market, with the federal government announcing a withdrawal of electric bus subsidies. Transport operators now face bearing the brunt of the increased costs of electric vs diesel buses alone, and in this environment, products with the best price will ultimately succeed, and the omission of tariffs for these buses further benefits the outlook for Chinese OEMs.