China’s EV industry faces double blow from EU export quota, VAT rebate cut

China’s electric vehicle (EV) makers have been hit with a double blow as both Beijing and Brussels introduce measures that will affect their exports, leading analysts to revise down their earnings forecasts for the industry.

The twin measures – combined with a sales decline in China’s domestic market – could create a “do-or-die moment” for some of the country’s 50-odd EV makers, ramping up financial pressure on the companies, according to industry officials.

On Friday, China and the European Union reached an “understanding” on trade that will see Brussels impose a quota on imports of Chinese-made hybrid vehicles – part of a wider effort by Europe to reduce its trade deficit with China.

That was followed by an announcement from Beijing on Monday that it would slash a value-added tax (VAT) rebate for exports of electric cars from 13 per cent to 9 per cent from April next year.