The European Union has raised tariffs on Chinese electric vehicles (EVs), with the aim of protecting its domestic motor industry. The new tariffs, which range from 17.4% to 37.6% for individual manufacturers, are in addition to the existing 10% duty on all EVs imported from China. This move is expected to increase the cost of EVs across the EU, potentially making them less affordable for European consumers.
The decision is a significant setback for Beijing, which is already embroiled in a trade war with Washington. The EU is the largest overseas market for China’s EV industry, and China is relying on high-tech products to help revive its economy. EU officials claim that the rise in imports is due to “unfair subsidisation,” which has allowed China-made EVs to be sold at significantly lower prices than those produced within the bloc. China has denied these allegations, asserting that it is not subsidising excess production to flood Western markets with cheap imports.
The new tariffs are set to take effect on Friday but are currently provisional, pending the outcome of an ongoing investigation into Chinese state support for its EV makers. The final decision on the imposition of these tariffs is expected later this year.
The impact of these tariffs extends beyond Chinese brands. Western firms manufacturing cars in China are also under scrutiny by Brussels. By imposing these tariffs, the EU aims to correct what it perceives as a distorted market. While the EU’s move might appear moderate compared to the US, which has increased its total tariffs to 100%, it could have more significant consequences. Chinese EVs are far more common in the EU than in the US, with the market share of Chinese brands in the EU rising from 0.4% in 2019 to almost 8% last year, according to Transport and Environment (T&E), a Brussels-based green group.
Potential winners and losers in this trade dispute vary. For instance, SAIC, the Chinese partner of Volkswagen and General Motors, faces the highest new tariff at 37.6%. Conversely, BYD, China’s largest EV maker, faces an additional duty of 17.4%, the lowest increase among Chinese manufacturers. This lower tariff might give BYD a competitive edge in the European market, despite the increased costs.
European car makers with joint ventures in China will also feel the impact. Those who cooperated with the EU’s investigation face a 20.8% tariff, while non-cooperative companies will pay the higher 37.6% tariff. US-based Tesla, the largest exporter of EVs from China to Europe, is awaiting a specifically calculated rate, which will be determined at the end of the investigation.
The EU’s tariffs are likely to reduce the influx of Chinese-made EVs, alleviating pressure on local manufacturers. In response, some Chinese EV firms are planning to establish production facilities within the EU to circumvent the new duties. For example, BYD is building its first European factory in Hungary, with production expected to begin by the end of next year. Additionally, SAIC is seeking a site for its first European factory, and Chery has signed a joint venture deal in Spain to produce EVs in Barcelona.
Bill Russo of the Shanghai-based consulting group Automobility suggests that the EU’s strategy encourages companies to invest within the EU rather than relying on exports from China. The tariff rates are designed to reflect the level of commitment these companies have towards investing in the EU.
