Volkswagen bringing cheaper EVs to Europe in the coming years as German automakers warn of potential tariff backlash

Chinese EVs are taking the European EV market by storm. According to the Rhodium Group, Chinese EV exports to the EU have increased sharply and now account for 37% of all EV imports into the region, a figure that corresponded to about $11.5 billion in 2023. This number is set to increase if things continue unchanged as, according to a report by Fortune, Chinese EV manufacturers make significantly more money selling their cars in the EU than in China. Naturally, this would further put pressure on European automakers like Volkswagen who’ve yet to produce an answer to Chinese companies such as BYD.

However, Volkswagen appears to have a plan albeit one that is to take a few more years to bear fruit. According to InsideEVs, Volkswagen has been developing cheaper EVs for “some time”. Targeting a price of €20,000, the company is reportedly planning to release the cars in 2027. While this means that Volkswagen whose cheapest EV, the ID.3 Pro costs close to €40,000, has a plan to deal with the onslaught of Chinese EVs, it also means that buyers shouldn’t expect much from the company on this front in the short term.

Hoping to curb the import of Chinese electric cars, the European Commission is expected to slap an import tariff on Chinese vehicles next month. However, the tariff is unlikely to affect the situation too much as, even with a possible import tariff as high as 30%, Chinese EVs could still remain significantly more profitable to sell in the EU than in China. Per the Rhodium Group, companies like BYD which are vertically integrated and control their entire supply chain will still find the EU market “highly attractive” even after high import tariffs.

Moreover, in the aftermath of an import tariff, China could also retaliate with measures against European car makers, a fear that is shared by German companies BMW and Volkswagen. 

BMW’s CEO Oliver Zipse fears the effect of any import tariff on the European car makers stating that “Tariffs are protective measures that essentially harm us. The market share of Chinese manufacturers in Germany and Europe is less than 1%. Europe is not being flooded with Chinese products and out of fear we are trying to close the borders.”

So, import tariffs on Chinese vehicles doesn't seem to be the answer. Here, one can reasonably say that as long as European automakers don't innovate and increase their competitiveness, regulation is unlikely to help.

Long story short, Volkswagen’s statement regarding a 2027 release for cheaper EVs is certainly good news and the EU market needs more such news if the local car companies are to have any chance against their Chinese counterparts.

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