By Jiahui Huang


Shares of BYD jumped on investors' optimism that the world's largest electric-vehicle maker would maintain its competitive edge despite planned additional tariffs from the European Union.

The company's Hong Kong-listed shares rose as much as 8.8% on Thursday, the top gainer among Hang Seng Index constituents. Its A shares were recently 4.2% higher in Shenzhen.

The sharp gains came after the European Commission, the EU's executive arm, said late Wednesday that it plans to impose an additional 17.4% duty on imports of BYD's battery EVs from China next month, the lowest among Chinese EV makers. That would come on top of an existing 10% tariff on all Chinese EVs.

The provisional duties will be introduced from July 4 if discussions with Chinese authorities don't lead to an effective solution, the commission said.

The increased tariffs came as Chinese EV makers have ramped up exports amid an intense price war and overcrowded market at home. Analysts said they aren't too concerned about the higher duties, however, as Chinese EV makers have been making efforts to localize production in Europe. Some are also diversifying their expansion overseas by exporting to places such as Southeast Asia, Australia, Brazil and Mexico, they said.

"It turns out to be the best case for BYD compared with other Chinese automakers," Nomura analyst Joel Ying said. The company could continue to enjoy strong gross margins despite the additional tariffs, thanks to higher margins from cars sold in Europe than those sold in China, he said.

"BYD is the only player that we believe could still break-even on an import model thanks to its structural cost advantage," Bernstein analysts led by Eunice Lee wrote in a note.

Analysts are also positive about BYD's localization push in Europe, with plans for a factory in Hungary to start production in the next three years.

The planned additional duties came in largely in line with market expectations, though the 38.1% tariff for state-owned SAIC Motor was a surprise.

SAIC's MG Motor, which sold two out of three China-made cars in Europe last year, will likely face the biggest challenge, CCB International analyst Qu Ke said.

"The inventory at dealers for MG will move a bit slower due to [the] narrowed price gap with local peers," Qu said.

In Shanghai trading on Thursday, SAIC's shares were 1.55% lower.

Shares of Geely Automobile, which will be hit with an additional 20% tariff, were 2.1% higher in Hong Kong, outperforming the Hang Seng Index's 0.4% gain.

Other Chinese carmakers that cooperated in the EU's investigation, such as XPeng, NIO and Great Wall Motor, will have to pay an additional duty of 21%, while those that didn't will be subject to an additional tariff of 38.1%.

Tesla's China-made cars "may receive an individually calculated duty rate at the definitive stage," the commission said.

"Unlike the U.S., the EU tariff didn't shut the door for Chinese electric-vehicle makers," Daiwa analyst Kelvin Lau said, adding that the 17%-21% of additional tariffs are "very mild."


Write to Jiahui Huang at jiahui.huang@wsj.com


(END) Dow Jones Newswires

06-13-24 0238ET