EU imposes tariffs of up to 38% on Chinese electric cars

Published on: 07/04/2024 – 11:51

3 minutes

Last year, Brussels launched an investigation into Chinese electric vehicle makers to determine whether state subsidies were unfairly harming European carmakers.

Since announcing the planned tariff hike last month – on top of the current 10 percent import duty – the European Commission has been in talks with Beijing to try to resolve the issue, with China threatening retaliation.

“Our investigation… concluded that battery electric vehicles produced in China benefit from unfair subsidies, posing a threat of economic harm to EU electric car manufacturers,” said European Trade Commissioner Valdis Dombrovskis.

In response, the Commission said it had imposed provisional duties on Chinese manufacturers, including 17.4% on market leader BYD, 19.9% ​​on Geely and 37.6% on SAIC.

The rates were adjusted slightly downward for Geely and SAIC, from the 20% and 38.1% initially announced, after additional information was provided by “interested parties,” it said.

They will come into force from Friday, with the final duties set to come into effect in November for a period of five years, pending a vote by the EU’s 27 member states.

Electric car producers in China that cooperated with the EU will face a 20.8% tariff, while those that did not cooperate will face a 37.6% tariff.

“Intensive” discussions with China

The move comes despite talks between Chinese and EU trade officials on June 22, but Brussels will continue to “engage intensively with China on a mutually acceptable solution,” Trade Commissioner Dombrovskis said.

“Any negotiated outcome of our investigation must clearly and fully address the EU’s concerns and respect WTO rules,” he said in a statement.

Beijing has already signalled its readiness to retaliate by launching an anti-dumping investigation into pork imports last month, threatening Spanish exports. Chinese media reports suggest Beijing could launch further investigations.

Chinese officials have also spoken out against investigations into state subsidies for green technology, including wind turbines and solar panels.

“It is obvious to everyone who is intensifying trade frictions and triggering a ‘trade war,'” a spokesperson for China’s Ministry of Commerce said on June 21.

The United States has already raised tariffs on Chinese electric cars to 100%, while Canada is considering similar action.

But Brussels faces a delicate balance between defending Europe’s auto industry – the jewel in its industrial crown with iconic brands like Mercedes – while avoiding a confrontation with China and meeting its carbon-cutting targets.

The EU wants more Europeans to drive electric vehicles by planning to ban the sale of new fossil fuel-powered cars from 2035.

According to the European Automobile Manufacturers’ Association, the market share of Chinese-made vehicles in EU electric car sales has increased from around 3% to more than 20% over the past three years.

Chinese brands account for about 8% of that share, he said.

The German Institute for World Economics in Kiel and Austrian institutes predict that the higher temporary tariffs will reduce vehicle imports from China by 42%. They add that prices for electric cars could increase by an average of 0.3 to 0.9% in the EU.

German discontent

Germany, a major trading partner of China, is not happy with the EU’s decision. German carmakers fear that any retaliatory measures could harm their business in China.

German Vice Chancellor Robert Habeck visited Beijing last month on a last-minute mission to find a way out of a destructive trade war.

But Germany’s moves to appease China, such as offering a compromise to cut tariffs to 15%, have been described by some in the auto industry as a set-up.

On the other hand, French carmakers have welcomed the tariffs, which aim to level the playing field.

Electric carmaker Tesla, owned by tech billionaire Elon Musk, is the only company to have asked Brussels for its own tariff rate calculated based on evidence it submitted.

© 2024 AFP