S&P Global — 24 June 2024
Daily Update: June 24, 2024
Tariff Rift Reveals EV Market's Strategic Importance
By Nathan Hunt
Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy
On June 12, the European Commission announced duties of up to 48.1% on what it called unfairly subsidized Chinese battery-electric vehicles (BEVs), indicating that it considers BEV manufacturing an industry of strategic importance to Europe. Regulators don’t tend to worry about the unfair subsidization of foreign companies in industries that don’t matter to them.
Europe charges a 10% tariff on imports from foreign carmakers. The commission wants to charge an additional 38.1% on imports of certain BEVs from China to counteract the subsidies Chinese car manufacturers receive from the Chinese government. An investigation from the commission provisionally concluded that the BEV value chain in China is heavily subsidized and that the import of China-subsidized vehicles constituted a threat to the EU BEV industry. The commission has shared the results of its investigation with the companies that would be affected by the new tariffs and invited them to present contradictory evidence before the tariffs go into effect.
While the increased tariffs would appear to favor European car manufacturers, major German carmakers such as Mercedes-Benz, BMW and Volkswagen have not welcomed the news, according to S&P Global Mobility.
"Protectionism risks starting a spiral: Tariffs lead to new tariffs, to isolation rather than cooperation,” BMW CEO Oliver Zipse said in a statement. “From the BMW Group's point of view, protectionist measures, such as the introduction of import duties, do not contribute to successfully compete on international markets."
China is a critically important market for German luxury automobiles. Should China introduce retaliatory tariffs, the revenue of European carmakers could be threatened. In addition, many European carmakers have manufacturing facilities in China — including BMW, Volvo, Polestar and Dacia — that could be subject to increased tariffs.
At a recent investor day, Stellantis CEO Carlos Tavares cautioned against the imposition of tariffs to protect European industry. Tavares said that protectionist stances only hurt competitiveness in the long run and that the only way to win is to figure out how to truly compete.
On the other side, European green group Transport & Environment released a statement welcoming the announced tariffs, believing that they should be part of a broader industrial policy to build up the European BEV supply chain. Italian Minister of Economic Development Adolfo Urso also supported the tariff hike.
Today is Monday, June 24, 2024, and here is today’s essential intelligence.
EC Announces Eur1.2 Billion For Second Hydrogen Bank Auction
The European Commission has announced a Eur1.2 billion ($1.3 billion) budget for the second auction under the European Hydrogen Bank mechanism, expected in the autumn. The news came at a stakeholder workshop on the European Hydrogen Bank organized by the EC's Directorate-General for Climate Action, trade association Hydrogen Europe said. The budget is substantially less than the Eur2.2 billion previously expected for the second round, though some funding will also go to support hydrogen imports, the EC told S&P Global Commodity Insights.
—Read the article from S&P Global Commodity Insights
Using PMI Indices To Forecast Eurozone And US Consumer Price Inflation
This research paper showcases the strength of the Purchasing Managers' Index™ (PMI®) in tracking changes in eurozone and US consumer price inflation. Due to the twin features of timeliness and non-revision, PMI data have a significant advantage relative to other indicators and S&P Global Market Intelligence’s empirical analysis finds that, when nowcasting changes in inflation, PMI-based models consistently outperform widely-used benchmarks..
—Read the article from S&P Global Market Intelligence
Your Three Minutes In Digital Assets: How Restaking Could Create An 'Internet Bond' Market
Restaking is an emerging practice (on the Ethereum blockchain) that enables network participants to earn yields on cryptocurrency pledged as a guarantee of security for services. It could prove integral to the Ethereum ecosystem's growth and, by offering different risk-return profiles, may create an “internet bond” market. With exchange-traded funds (ETFs) backed by ether (ETH, Ethereum's native cryptocurrency) debuting in the US this summer, understanding the Ethereum ecosystem will be increasingly important.
—Read the article from S&P Global Ratings
Rated China Carmakers Can Take The Heat From European Tariff Hikes On EVs
The Chinese automakers we rate will be able to cope with the EU's provisional tariffs on import of Chinese battery electric vehicles (BEVs). Their exposure to BEV exports to Europe are small and these companies can manage tariffs jumping by up to 38.1% starting next month, on top of the existing 10% rate. "This move will likely curb the growth in China's BEV export to Europe. Such sales jumped by over 30% last year, and BEVs imported from China contributed to over 20% of total BEV sales in Europe in 2023," said S&P Global Ratings credit analyst Stephen Chan. "However, the overall impact is limited as China-made BEVs exported to Europe contributed less than 10% of the country's total auto exports last year."
—Read the article from S&P Global Ratings
Ahead Of Presidential Debate, US Oil Industry Urges Action On LNG Pause, Leasing
The American Petroleum Institute rolled out June 17 a policy wish list ahead of the first presidential debate, set for June 27, focusing on repealing tailpipe emissions rules, lifting the pause in LNG export reviews and overhauling the leasing strategy to bolster production. The trade group also highlighted its desire for permitting reform legislation to ease barriers for infrastructure development, and it listed tax policies that bolster US energy resources among its priorities.
—Read the article from S&P Global Commodity Insights
Automotive Insights — Q1 2024 Canadian EV Information and Analysis
Zero-emissions vehicles (ZEVs) account for 1 in 8 new vehicles registered in Canada. ZEVs market share was 12.5% for Q1 2024; down from 13.2%. ZEVs volume decreased 9.3% while total light duty vehicles (GVW =< 8,500 lbs) volume decreased by 4.0%. The market share of battery electric vehicles (BEVs) decreased to 9.2%; with volume decreasing by 11.7%.
—Read the article from S&P Global Mobility
2024 Global Emerging Markets Virtual Conference: Is Emerging Asia Picking Up Steam? (July 3, 2024)
Join us for an engaging exploration of the latest trends and opportunities in emerging markets across Asia. This virtual event will feature a dynamic mix of industry professionals and S&P Global Ratings speakers who will share their insights and perspectives on the evolving landscape of emerging Asia.
—Register for the virtual event from S&P Global Ratings