A European Commission investigation launched last year concluded that government subsidies to Chinese EV makers were unfairly harming European rivals – which Brussels wants to protect as they transition from thermal to electric power.
The Chinese Chamber of Commerce in the EU denounced the tariffs imposed in addition to the current 10 percent import duty, calling them “politically motivated” and “protectionist”, and expressed hope the dispute could be resolved through negotiations.
European countries are divided on the move. Germany and its domestic auto giants, which do significant trade with China, fear it could do more harm than good if it curbs EU exports, as Beijing has already threatened.
German auto giants Volkswagen described the move as “damaging”, while the head of BMW said the tariff fight “leads to a dead end”.
France and Italy have pushed to impose tariffs on Chinese electric vehicles – whose market share in the EU has grown enormously – but Sweden has objected, as has Germany, while Hungary is outright opposed.
Provisional tariffs will come into effect on Friday, with final levies set to be implemented in November for a five-year period, pending a vote by the EU’s 27 states.
“Our investigation concluded that battery electric vehicles produced in China are benefiting from unfair subsidies, which pose a risk of economic harm to the EU’s own electric car manufacturers,” EU trade chief Valdis Dombrovskis said.
In response, the commission imposed provisional tariffs on major Chinese manufacturers, including 17.4 percent on market-dominant company BYD, 19.9 percent on Geely and 37.6 percent on SAIC.
Also read: How Chinese electric vehicle makers like BYD want to beat Tesla and other European carmakers
Other producers in China who cooperate with Brussels will face tariffs of 20.8 percent, while those who do not cooperate will face a maximum duty of 37.6 percent.
US technology billionaire Elon Musk’s Tesla – which manufactures in China – is the only electric vehicle maker to have asked Brussels for its own duty rate, which would be calculated based on evidence it submits.
Tesla Model 3 The electric Mini, Volvo EX40 and all other non-Chinese branded cars built in China will also be affected.
A Tesla spokesperson suggested that Model 3 prices would increase “in the short term.”
‘Intensive’ talks with China
The move comes despite the start of talks between Chinese and EU trade officials, with trade chief Dombrovskis saying Brussels would “continue intensive dialogue with China to find a mutually acceptable solution.”
Chinese electric carmaker Nio said it still hoped to find a solution with the EU, while fellow EV maker Xpeng said it would “find ways to minimise the impact on consumers” without changing its international strategy.
EU officials have indicated they may not ultimately need to impose tariffs if talks lead to a solution.
Also read: Experts say China will dominate the global auto market by 2030
But Dombrovskis cautioned that “any negotiated outcome of our investigation must clearly and fully address the EU’s concerns and be consistent with WTO rules.”
Cui Dongshu, secretary general of the China Passenger Car Association, told AFP that the move would “obviously have a negative impact on the development of China’s EV industry, especially its development in the EU in the short term.”
Beijing has already signaled its readiness to retaliate by launching an anti-dumping investigation into pork imports last month, and Chinese media suggest further probes could follow.
Chinese officials have also criticised an EU investigation targeting government subsidies in the green technology sector, including wind turbines.
Import cuts expected
The United States has already raised customs duties on Chinese electric cars to 100 percent, while Canada is considering similar action.
But Brussels faces a delicate balance as it must protect Europe’s auto industry — the jewel in its industrial crown — while avoiding a damaging confrontation with China and meeting its own targets for cutting carbon emissions.
The European Union aims to have Europeans widely use electric vehicles as it plans to ban the sale of new fossil-fueled cars from 2035.
The market share of Chinese-made electric vehicles in the EU has grown from about three percent to more than 20 percent over the past three years, according to the European Automobile Manufacturers Association.
It said Chinese brands accounted for around eight per cent.
Austrian institutes as well as Germany’s Kiel Institute for the World Economy have estimated that the provisional higher taxes would reduce vehicle imports from China by 42 percent.
He said prices of electric cars across the EU could rise by an average of 0.3 to 0.9 percent.
German auto makers fear any retaliatory action could hurt their activities in China.
Volkswagen said the tariffs were “generally not appropriate for strengthening the competitiveness of the European automotive industry in the long term – we reject them.”
First Publication Date: 05 July 2024, 08:12 AM IST