Shares of Chinese electric vehicle (EV) maker BYD Company (OTCMKTS:BYDDY) rallied on Thursday as investors cheered lower-than-anticipated additional tariffs imposed on the company by the European Union (EU). The company’s Hong Kong-listed shares (HK:1211) jumped 6% today while the ADRs (American depositary receipts) listed in the U.S. trended 3% higher as of writing.
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BYD Faces Milder EU Tariffs
The European Union plans to impose additional tariffs on EVs imported from China, starting in July. The bloc is expected to levy extra tariffs of as much as 48% on Chinese EV makers, including BYD, SAIC Motor, and Geely Automobile Holdings (OTCMKTS:GELYF).
However, among the Chinese EV makers named by the European Commission, BYD is facing the lowest additional tariffs. In particular, the tariffs for BYD will increase from the existing 10% to 27.4%, reflecting an additional tariff of 17.4%. The company is in a better position than other Chinese EV makers, thanks to its investment in a factory in Hungary. BYD expects production at the Hungarian factory to start in the next three years.
It is worth noting that the state-owned SAIC, which is the top EV exporter to the EU, has been slapped with the maximum additional tariff of 38.1% on top of the existing 10%. Meanwhile, Geely faces a 20% extra tariff.
Impact of EU’s Tariffs
The new tariffs imposed by Europe are way lower than the 100% duties recently announced by the Biden administration. The additional tariffs by the EU and U.S. come at a time when Chinese EV makers are expanding into international markets amid growing competition in the domestic space.
Experts think that the new tariffs will drive Chinese EV makers to opt for local production in Europe. While some contend that it is too early to assess the impact of the spike in tariffs on Chinese EV makers, others believe that the China-based automakers will remain competitive despite additional duties.
Especially, BYD is not expected to be severely impacted, thanks to its extensive scale, solid margins, and competitive position compared to smaller rivals in Europe and China.
BYD Maintains its Dominance
In separate news, citing data released by the China Passenger Car Association for May, the CnEVPost noted that BYD maintained its dominant position as the largest player in China’s new energy vehicle (NEV) retail market with a 33.4% market share. The company’s May retail sales increased by 21.5% year-over-year to 268,226.
Meanwhile, Tesla’s (NASDAQ:TSLA) retail sales in China increased by about 30% year-over-year to 55,215 vehicles. The Elon Musk-led EV company ranked third in China’s NEV retail market in May, with a market share of 6.9%. Geely ranked second with a 7% market share.
Is BYD Stock a Good Buy?
BYD Company scores a Moderate Buy consensus rating on TipRanks based on two Buy recommendations over the past three months. The average BYDDY stock price target of $37.78 implies a possible downside of 36% from current levels. The U.S.-listed shares have advanced more than 6% so far this year.
