The tariffs had been expected for months, but many European automakers warned that they would drive up prices for consumers and set off a trade war with China.
The European Union said on Wednesday that it would impose additional tariffs of up to 38 percent on electric cars built in China, a move it said would help level the playing field for automakers in Europe.
The tariffs, which have been expected for months, come on top of existing 10 percent duties, but the level of their impact has been disputed. Some European automakers argue they will set off a trade war, but other experts have said they will not stop China’s dominance in the industry.
Instead, they argue that incentives to make low-emission cars more attractive to drivers are needed instead, if the European Union hopes to meet its goal to ban the sale of new internal combustion engine vehicles in 2035.
What does this mean for consumers?
Industry experts predict that the increased duties on electric vehicles from China will hurt consumers more than they do Chinese automakers, by increasing the price of the most affordable electric cars on the market.
But according to an investigation by the European Union, the entire supply chain of Chinese electric cars enjoys government subsidies that allow automakers there to drastically reduce their production costs. This gives Chinese producers an unfair competitive edge over their European rivals, the European investigation found.
BYD’s Dolphin model, for example, sells in Europe for about 32,400 euros, or about $34,900, compared with nearly €40,000 for a Tesla Model Y and €37,000 for a Volkswagen ID.4.
Clamping down on E.V. exports to E.U. nations could drive more automakers in China to shift assembly to European countries like Hungary or Spain, where costs for labor and parts are higher, resulting in higher costs for consumers.
How will this affect European automakers?
Many European car manufacturers are heavily dependent on China, the world’s largest market for automobiles, for both exports and production in the domestic market.
“This decision for additional import duties is the wrong way to go,” Oliver Zipse, chief executive of BMW, said on Wednesday. “The E.U. Commission is thus harming European companies and European interests”. German manufacturers — BMW as well as Mercedes-Benz and Volkswagen — not only sell to the Chinese but also have large production and research and development operations in China. They fear that any retribution from Beijing could harm their business. Others remain interested in collaborations with the Chinese. Last month, Stellantis said it would start selling two models in Europe from its joint venture with the Chinese automaker Leapmotor as part of efforts to circumvent the tariffs.
Will China Retaliate?
Beijing passed a law in April to strengthen its ability to hit back should the U.S. or EU impose tariffs on exports of the world’s No. 2 economy.
It has already launched an anti-dumping investigation into mostly French-made imports of brandy and French cognac producers are “deeply” worried about retaliation for EV tariffs, a trade body said on Wednesday.
A drone view shows BYD electric vehicles before being loaded onto a vehicle carrier for export to Brazil, at the port of Lianyungang in Jiangsu province, China April 25, 2024.
The EU provisional duties are set to apply by July 4, with the investigation set to continue until Nov. 2, when definitive duties, typically for five years, could be imposed.
The Commission said it would apply an additional 21% for companies deemed to have cooperated with the investigation and 38.1% for those it said had not. The indicative tariffs are above expectations of analysts of between 10% and 25%.
Western automakers like Tesla (TSLA.O), opens new tab and BMW (BMWG.DE), opens new tab that export cars from China to Europe were considered to be cooperating, the EU Commission said, adding that Tesla, currently the largest exporter of cars to Europe from China, has requested to have a separate company-specific rate set.
The Commission has still to determine whether to apply tariffs retroactively for three months, an official said.
Brussels said it had contacted Chinese authorities to discuss its findings and explore ways of resolving issues identified.
BYD declined to comment. SAIC and Geely, the two other companies investigated by the Commission, and Tesla did not immediately respond to requests for comment.
