Auto destruct. The Red Sea crisis sounds like positive news for Europe’s troubled electric vehicle makers. Attacks by Yemen’s Houthi militants on merchant ships in the entrance to the Suez Canal are blocking a major trading route with Asia, a key conduit for Chinese competitors keen to eat their lunch. Unfortunately for domestic players like Volkswagen, Stellantis and Renault, they don’t look like a game-changer.

VW remains Western Europe’s battery EV market leader, with a 22% market share, according to Schmidt Automotive Research (SAR). But Chinese-owned brands, ranging from SAIC Motor’s MG to battery-turned-carmaker BYD and pure-play EV startup Nio, could nearly double their European market share to 15% by 2025, the European Union reckons. Tesla, which exports some of its EVs to Europe from Shanghai, is on 18%.

Red Sea blockages complicate this trade flow. Chinese EV exporters like BYD use ro-ro ships, short for “roll-on, roll-off”. These are already in short supply due to the pandemic, when many older ships were scrapped as demand tanked in 2020. Right now, daily charter prices are at a record $120,000 per day, according to SAR, six times higher than in 2019, and 20% higher than before the Oct. 7 attacks by Hamas militants which killed 1,200 people in Israel.

Increasingly, major car carriers like Japan’s Nippon Yusen, known as NYK Line, are steering clear of the Red Sea. A typical voyage from China to Europe via Africa instead of the Suez Canal is 10 to 20 days longer, which makes a particular difference in the car industry, where average inventories for the top 10 manufacturers in Europe are a notably short 54 days of sales, according to S&P Global Market Intelligence. The additional travel adds at least $1.2 million to freight rates for a ro-ro with a shipping capacity of 5,000 cars, or $240 per car, according to Breakingviews calculations. Higher insurance and fuel costs maybe up the price per vehicle by another $350.

The problem for VW and other European players is that even factoring in Red Sea issues Chinese EVs remain substantially cheaper. The average retail cost of a Europe-made EV is around 56,000 euros ($61,000), according to JATO Dynamics. While BYD’s EV exports to Europe are understood to be priced about 150% higher than those it sold domestically, even the high-end BYD Seal – seen as a potential challenger to Tesla’s Model 3 – only costs around 45,000 euros.

The EU’s anti-subsidy tariffs on Chinese EVs are more likely to move the dial. But even if Brussels decided to hike tariffs from the current 10% to 25% and the company passed them on in full, BYD prices would still only reach about 50,000 euros, Breakingviews calculated using a UBS analysis that assumes the Chinese cost of a BYD Seal on which the tariff is set is around $27,000. When combined with higher costs from the Red Sea for EV exporters, a smaller pricing gap would theoretically give European carmakers breathing space to get their EV offers motoring.

Even so, this is hardly a panacea for VW and domestic peers. After all, they import key parts like high-tech steering wheels from China. Most notably they rely on Asian suppliers, especially those in the People’s Republic, for 70% of the batteries that power their EVs. Auto parts stock is often kept at just two to three days’ supply, per industry sources, so slower delivery times by sea or changing to ship by air may therefore push up European electric car prices too. And aggressive tariffs may incur a Beijing response that further hikes the cost of these components.

For VW and co, all this is happening against the backdrop of a tougher policy environment. In December Berlin, faced with a budget crisis, scrapped state-sponsored EV purchase subsidies. In the same month the EU recorded its first year-on-year drop in EV sales since April 2020.

Tot it all up, and Red Sea strife may help European EV makers a bit. But it doesn’t really offset the wider threat from Chinese competition. The most likely upshot is that it takes longer for EVs in the bloc to fall in price sufficiently to displace petrol cars. With both the UK and EU keen to ban traditional petrol car sales by 2035, that may be the Suez blockage’s most problematic auto legacy.