What to know about Europe’s tariffs on Chinese electric vehicles

FRANKFURT – The European Union made its final decision sharply higher customs duties In electric vehicles imported from China. Electric vehicles are the latest flashpoint in a broader trade dispute over Chinese government subsidies and Beijing’s growing exports. green technology to the bloc of 27 countries.

The duties came into force provisionally in July and were finalized after negotiations between the EU and China failed to resolve differences. Negotiations are expected to continue and it is stated that the EU may remove the duties if an agreement is reached.

Here are some key facts about EU customs duties:

What did the European Union do?

The European Commission, the EU’s executive arm, conducted an eight-month investigation and concluded that companies producing electric cars in China benefited from massive government aid that allowed them to undercut their EU rivals, gain a huge market share and threaten jobs in Europe. There was. .

Taxes vary by manufacturer: 17% for BYD, 18.8% for Geely and 35.3% for state-owned SAIC. Other EV manufacturers in China, including Volkswagen and BMW, will be subject to a 20.7% tax. The commission has a rate calculated individually. Tesla’s 7.8%.

“By adopting these proportionate and targeted measures after a rigorous investigation, we are defending fair market practices and the European industrial base,” said Valdis Dombrovskis, Executive Vice-President of the European Commission.

The duties will remain in place for five years unless an amicable solution is found.

Why did the commission take action?

Chinese-made electric cars jumped from 3.9 percent of the electric vehicle market in 2020 to 25 percent by September 2023, the commission said.

Companies in China have achieved this with the help of subsidies all along the production chain, from cheap land for factories from local governments to below-market lithium and battery supplies from state-owned enterprises, to tax breaks and below-interest financing, the commission said. from state-controlled banks.

The rapid growth in market share has sparked fears that Chinese cars will eventually threaten the EU’s ability to produce its own green technology needed to combat climate change, as well as the jobs of 2.5 million workers at risk in the automotive industry and the jobs of a further 10.3 million. Their business is indirectly tied to electric vehicle production.

Subsidized solar panels from China decimated European manufacturers; An experience that European governments do not want repeated in the automotive industry.

Unusually, the commission acted on its own, without any complaints from the European automotive industry. Germany, industry leaders and home to BMW, Volkswagen and Mercedes-Benz, has opposed the tariffs. This is because most of the cars that will be subject to tariffs are produced by European companies, and China could retaliate against the automotive industry or other areas.

How is China reacting?

Beijing has harshly criticized the investigation and higher posts as protectionist and unfair.

The Department of Commerce also launched anti-dumping investigations into European exports of brandy, pork and dairy products. announced earlier this month Temporary tariffs between 30.6% and 39% on French and other European brands after EU member states voted in favor of finalizing tariffs on electric vehicles.

Authorities also said they are considering whether to increase customs duties on imports of gasoline-powered and large-motor vehicles.

Talks between the two sides have focused on so-called “price commitments” as a possible solution in recent weeks. In such a scenario, automakers would agree to the minimum sales price of their electric vehicles in Europe.

Some Chinese automakers are considering producing cars in Europe to avoid any tariffs and be closer to the market. Chery has a joint venture to produce cars in Spain’s Catalonia region, while BYD is building a factory in Hungary.

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

Biden administration raise tariffs From the current 25% to 100% on Chinese EVs. At this level, US tariffs block almost all Chinese electric vehicle imports.

This is not what Europe is trying to do.

EU officials want affordable electric cars from abroad to meet their goal of reducing greenhouse gas emissions by 55% by 2030; but without subsidies that EU leaders see as unfair competition

The planned tariffs aim to level the playing field by approximating the extent of excessive or unfair subsidies provided to Chinese automakers.

European countries also subsidize electric cars. The question in trade disputes is whether subsidies are fair and available to all automakers, or whether they skew the market in favor of one party.

What does this mean for European drivers and car manufacturers?

It’s unclear what impact the taxes will have on car prices. Chinese automakers can produce cars so cheaply that they can absorb taxes in the form of lower profits rather than raising prices.

Currently, Chinese automakers often sell their vehicles abroad at much higher prices than in China; This means that despite recent market gains, they still prefer profit over market share. According to Rhodium Group’s calculations, five of BYD’s six models would make a profit in Europe even with a 30% tariff.

According to Rhodium, BYD’s Seal U Comfort model retails for the equivalent of 21,769 euros ($23,370) in China and 41,990 euros ($45,078) in Europe. Basic model BYD’s compact SeagullThe model, which is expected to arrive in Europe next year, is sold for approximately $ 10,000 in China.

The Commission argues that consumers may benefit from cheaper Chinese cars in the short term, but allowing unfair practices could mean less competition and higher prices in the long term.

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Moritsugu reported from Beijing.