As many as 9 out of 10 electronic cigarettes in Europe come from China. 48% of the European market, a volume of 6.6 billion euros, is represented by irregular trade and by 2030 the volume will reach 10.8 billion euros. This is what emerges from a new study conducted by New Fraunhofer. Here are all the details.
WHAT EMERGES FROM THE STUDY
“For the first time, we have managed to map the underground market of electronic cigarettes in Europe, based on commercial analyses and the supply chain, customs statistics, and market segmentation – explains Uwe Veres-Homm, head of risk analysis and localization at Fraunhofer IIS -. Our analyses show that about 90% of electronic cigarettes present in Europe come from China.”
THE CHARACTERISTICS OF THE IRREGULAR ELECTRONIC CIGARETTE MARKET
Irregular products are goods present on the grey and black market that violate national tax regulations, labeling requirements, or homologation standards, or whose origin cannot be clearly traced. Of these, 35% can be clearly attributed to illegal trade; about 13% are private imports of unapproved or untaxed products. The estimated tax loss in 2024 in Germany alone was about 119 million euros. The irregular market shows no signs of stopping with an estimated rate of 8.6% per year.
CHINESE PRODUCTION HAS ITS NERVE CENTER IN SHENZHEN
About 72% of Chinese electronic cigarette production takes place in Shenzhen, with as many as 70% of the manufacturers of these devices based in this city. Looking at Europe instead, we find Germany, the Netherlands, and Belgium as the nerve centers for further distribution. From there, shipments are often transferred onto trucks and transported between EU countries with fewer controls. A method that allows the entry of irregular goods into the internal market and tax evasion.
EXPANSION OF SHIPMENT VOLUMES
An additional problem is represented by the volume of goods shipments arriving daily from China. According to the European Commission, about twelve million packages arrived in the EU daily last year, a number higher than in the previous two years. Consumers also increasingly order directly from Asia.
EXPLOITATION OF REGULATORY GAPS
Moreover, according to the study, the lack of uniformity in community regulations represents an advantage for platform suppliers. These goods “evade quality and consumer protection controls and are extremely profitable for producers – emphasizes Horst Manner-Romberg, CEO of MRU Beratungs- und Verlagsgesellschaft mbH, which collaborated with Fraunhofer IIS -. Price differences within the internal market of the European Union also create incentives for smuggling and re-importations from neighboring countries, putting enormous pressure on legal suppliers.”
Differences in taxes and regulations create price disparities and a lack of transparency, gaps that market operators exploit. “Uniform standards for licensing, product quality, and taxation could help reduce tax losses and strengthen consumer protection,” adds Uwe Veres-Homm. “Electronic cigarettes arrive in Europe in standard packaging. What seems like innocent trafficking actually constitutes an underground market worth billions – reiterates Rico Back, managing partner of SKR AG, which commissioned the study -. The consequences for the economy and society are immense, and logistics is involuntarily at the center of the problem.”
A GREATER TRANSPARENCY IS NECESSARY
From a logistical point of view, greater transparency and close collaboration are essential: “No customs authority in the world is able to check millions of packages every day without errors – he points out -. We must make supply chains digitally traceable and collaborate more closely with countries of origin. Only when goods flows are transparent and interconnected will it be possible to effectively curb illegal imports. If we add liquids, with separate packages difficult to control, the situation becomes even more explosive.”
However, a total ban on electronic cigarettes, such as the one currently under public discussion, would be counterproductive. If legal distribution channels were eliminated, the risk is that these shares would shift to the illegal market.
THE THREE PATHS SUGGESTED BY THE NEW FRAUNHOFER STUDY
The study suggests three measures that can be adopted regardless of political majorities. First, uniform definitions and product classifications: many distortions arise from the fact that identical products are registered, classified, and taxed differently in various EU member states. Then digital traceability and a central data platform: technologies for supply chain transparency, such as blockchain-based serialization or AI-supported risk assessment, can help distinguish legal from illegal goods flows. It is important that this data flows into an international central platform that connects production, import, consumption, and especially regulatory violations, thus enabling holistic market surveillance. Finally, cooperation with countries of origin: especially for mass-produced goods from China, the most effective control can be exercised before export, not only at import. Close cooperation between European and Asian authorities, together with linking to the central data platform, could create transparency along the entire supply chain and curb illegal flows at the source.
