What you need to know about European tariffs for Chinese electric vehicles

FRANKFURT, Germany (AP) — The European Union has finalized its deal significantly higher customs duties on electric vehicles imported from China. Electric vehicles are the latest flashpoint in a broader trade dispute over Chinese government subsidies and Beijing’s booming exports green technology to the bloc of 27 countries.

The tariffs came into force provisionally in July and were finalized after talks between the EU and China failed to resolve their differences. Negotiations are expected to continue and the EU could lift the tariffs if an agreement is reached.

Here are some basic facts about EU customs duties:

What has the European Union done?

The European Commission, the EU’s executive arm, conducted an eight-month investigation and concluded that companies making electric cars in China benefit from massive government support that allows them to undercut rivals in the EU. to gain a large market share and threaten European jobs. .

The levies differ depending on the maker: 17% for BYD, 18.8% for Geely and 35.3% for state-owned SAIC. Other EV manufacturers in China, including Volkswagen and BMW, would be subject to a 20.7% tax. The committee uses an individually calculated rate Tesla of 7.8%.

“By taking these proportionate and targeted measures following a rigorous investigation, we are standing up for fair market practices and for the European industrial base,” said Valdis Dombrovskis, Executive Vice-President of the European Commission.

Unless an amicable solution is found, the rights will remain in force for five years.

Why did the committee take action?

Chinese-built electric cars rose from 3.9% of the EV market in 2020 to 25% in September 2023, the commission said.

The commission says companies in China have achieved this with the help of subsidies across the production chain, from cheap land for factories from local governments, to below-market supplies of lithium and batteries from state-owned enterprises, to tax breaks and below-interest financing. of state banks.

The rapid growth in market share has led to fears that Chinese cars will ultimately threaten the EU’s ability to produce its own green technology needed to fight climate change, as well as the jobs of 2.5 million workers at risk in the automotive industry and another 10.3 million people. whose jobs are indirectly dependent on the production of electric vehicles.

Subsidized solar panels from China have wiped out European manufacturers – an experience European governments are reluctant to see repeated with their car industries.

Unusually, the commission acted on its own, without complaint from the European car industry. Industry leaders and Germany, home to BMW, Volkswagen and Mercedes-Benz, have opposed the tariffs. That’s because many of the cars that will face tariffs are made by European companies, and China could retaliate against the auto industry or other areas.

How does China respond?

Beijing has sharply criticized the investigation and the higher duties as protectionist and unfair.

The Commerce Department has also launched anti-dumping investigations into European exports of cognac, pork and dairy products. It was announced earlier this month preliminary rates from 30.6% to 39% on French and other European brandies, after EU member states voted in favor of finalizing tariffs on electric vehicles.

Officials have also said they are considering whether to increase tariffs on imports of gasoline vehicles with large engines.

Discussions between the two parties in recent weeks have focused on so-called ‘price agreements’ as a possible solution. In such a scenario, car manufacturers would agree to a minimum retail price for their electric vehicles in Europe.

Some Chinese automakers are considering making cars in Europe to avoid possible tariffs and be closer to the market. BYD is building a factory in Hungary, while Chery has a joint venture to build cars in the Spanish region of Catalonia.

How do the EU tariffs compare to the tariffs announced by the US?

The Biden administration does increasing rates on Chinese EVs from the current 25% to 100%. At that level, the US tariffs block virtually all Chinese imports of electric vehicles.

That is not what Europe is trying to do.

EU officials want affordable electric cars from abroad to help them achieve their goals of cutting greenhouse gas emissions by 55% by 2030 – but without the subsidies that EU leaders see as unfair competition

The planned tariffs are intended to level the playing field by approximating the extent of excess or unfair subsidies available to Chinese automakers.

European countries also subsidize electric cars. The question in trade disputes is whether subsidies are fair and available to all car manufacturers, or distort the market in favor of one side.

What does this mean for European drivers and car manufacturers?

It is not clear what impact the duties will have on car prices. Chinese automakers are able to make cars so cheaply that they can absorb the duties in the form of lower profits instead of raising prices.

Currently, Chinese automakers often sell their vehicles abroad at much higher prices than in China, meaning they prioritize profits over market share, even given their recent market gains. According to calculations by the Rhodium Group, five of BYD’s six models in Europe would still make a profit even with a 30% tariff.

BYD’s Seal U Comfort model sells for the equivalent of 21,769 euros ($23,370) in China, but 41,990 euros ($45,078) in Europe, according to Rhodium. The basic model of BYD’s compact Seagullwhich will arrive in Europe next year, will sell for around $10,000 in China.

While consumers could benefit from cheaper Chinese cars in the short term, allowing unfair practices could ultimately lead to less competition and higher prices in the long run, the commission argues.

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Moritsugu reported from Beijing.