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EU slaps tariffs of up to 38% on Chinese electric vehicles

July 4, 2024

The European Commission has said it is imposing provisional duties on Chinese electric cars to counteract what it called unfair subsidies received by Chinese EV makers.

Leapmotor vehicles are parked outside a showroom in Hangzhou in eastern China's Zhejiang province
China and the European Union are open to holding talks on the EU’s recent decision to raise tariffs on imports of Chinese-made electric vehiclesImage: Caroline Chen/AP Photo/picture alliance

The European Commission on Wednesday announced it would impose new tariffs of up to 37.6% on Chinese electric vehicles starting on Friday.

The Commission said the new duties are to counteract what it called "unfair" subsidies Chinese electric vehicle makers receive from the Chinese government. The subsidies, according to the EU, create a “threat of economic harm” to European car manufacturers.

As of Friday, the new provisional tariffs will be added to the existing 10% import duties. A final decision on the tariffs is set for November as Brussels and Beijing aim to resolve the conflict through negotiations. 

What did the EU say?

"There is no basis for China to retaliate after the EU said it will impose tariffs of up to 37.6% on imports of electric vehicles made in China," EU trade chief Valdis Dombrovskis said on Thursday in an interview with press agency Bloomberg.

European Commission President Ursula von der Leyen said the Commission's new provisional duties of 17.4% to 37.6% aim to stop a threatened flood of cheap, state-subsidized electric vehicles.

The European Commission last month initially announced provisional tariffs that are almost identical to those being applied from Friday.

Commission authorities, however, made slight adjustments after companies pointed out minor errors in the initial calculations.

Over the next four months, the tariffs will be provisional while both sides continue intensive negotiations, the European Commission said.

The EU's anti-subsidy investigation will continue for nearly four more months. By then, the Commission could suggest "definite duties" for five years, which EU members will vote on.

China Yantai | Autos im Hafen zum Export
Chinese manufactured electric cars waiting to be loaded on the cargo ship for export Image: AFP

How did China respond?

Beijing said it plans to take "all necessary measures" to safeguard China's interests. Chinese officials have considered imposing new tariffs on products like cognac and pork imported into China in retaliation.

"So far both sides have held several rounds of technical talks over tariffs on the issue," the Chinese Commerce Ministry said on Thursday.

"There is still a four-month window before arbitration, and we hope that the European and Chinese sides will move in the same direction, show sincerity, and push forward with the consultation process as soon as possible," said He Yadong, a ministry spokesperson.

Why are German drivers hesitant to buy electric vehicles?

Tesla and BMW face lower tariffs

Not all Chinese EV manufacturers were alarmed by the new EU duties.

"The tariffs will have only a modest impact on the majority of Chinese firms," the Chinese Passenger Car Association said.

Companies that cooperated with the EU's anti-subsidy investigation, including Western companies like Tesla and BMW, will face a 20.8% tariff on vehicles made in China. Companies that did not cooperate will face a 37.6% tariff.

The Commission estimates that Chinese brands have increased their share of the EU market to 8% from less than 1% in 2019 and could reach 15% by 2025. It also pointed out that Chinese EVs are generally priced 20% lower than EU-made vehicles.

European policymakers aim to prevent a repeat of the solar panel crisis from a decade ago when limited EU action on Chinese imports led to the collapse of many European manufacturers. 

The United States plans to impose a 100% tariff on Chinese EV imports starting in August.

How did carmakers react?

Some manufacturers had already said they would pass on the increased costs from the tariffs to consumers. Chinese brands MG and NIO are considering raising their car prices in Europe later this year. US-based Tesla also said it plans to increase the price of its Model 3.

The Chinese carmaker BYD faces the lowest hike of 17.4% on top of the current 10% duty. So far it has revealed no plans to hike its EV prices in the EU.

The threat of duties might drive Chinese automakers to invest in factories in Europe, despite higher labor and manufacturing costs compared to China. 

However, Volkswagen, Europe's largest carmaker, swiftly criticized Thursday's announcement. 

"The negative effects of this decision outweigh any benefits for the European and especially the German automotive industry," a Volkswagen spokesperson said in a statement. 

Auto industry executives have warned that tariffs could hurt their car sales in China, where they already face tough competition from local brands. Chinese cars are usually 20% cheaper than EU-made models, Reuters reported.

sp/sms (AFP, DPA, Reuters)