The Boomerang of EU Tariffs on Chinese Electric Vehicles
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Since last autumn, the EU Commission has been investigating whether electric cars in China are subsidized in a way that distorts competition. According to the findings of the Commission, Chinese electric cars are on average around 20 percent cheaper than models manufactured in the EU. When announcing the investigation, EU Commission President Ursula von der Leyen said: "The price of these cars is artificially depressed by massive state subsidies - this distorts our market."  And so the Commission has now come to the preliminary conclusion that the value chain for battery electric vehicles (BEV) in China is unfairly subsidized. This threatens to harm manufacturers in the EU. The Commission is therefore now threatening to impose tariffs of between 20 and a good 38 percent, on top of already existing 10 percent in tariffs.

The Chinese car manufacturers would be affected by these additional tariffs to very different degrees, depending on the degree of cooperation with the EU Commission. While BYD still has to expect comparatively mild punitive tariffs of 17.4 percent, Daimler partner and Volvo and Polestar owner Geely is already facing 20 percent. The currently largest Chinese car manufacturer, SAIC Motor Corporation, which sells electric cars and light commercial vehicles with electric drives in Europe under the brand names MG and Maxxus, is even to be hit with a countervailing duty of 38.1 percent - cooperation with the EU Commission has apparently been weak here so far. Other BEV producers in China, which cooperated in the investigation but have not been sampled, would be subject to the following weighted average duty: 21%. All other BEV producers in China which did not cooperate in the investigation would be subject to the following residual duty: 38,1%.

The tariffs will hurt European car manufacturers too

However, Tesla and European car manufacturers such as BMW, Mini and Dacia, which have electric cars produced in China and export them to Europe from there, are also affected. A 'company-specific' duty rate of 21 percent has already been set for the Tesla Model 3 imported from China. Imports by German manufacturers have yet to be assessed. However, they are likely to face the same surcharge. This would put them at a greater price disadvantage than BYD.


German VDA President Hildegard Müller commented on the EU's latest decision: "The EU's announcement that it will temporarily impose high additional tariffs of up to 38.1 percent on electric cars from China from the beginning of July is a further step away from global cooperation. This measure further increases the risk of a global trade conflict. It is also a fact that countervailing duties on e-cars imported from China are not suitable for strengthening the competitiveness of the European automotive industry."

My verdict on these punitive tariffs on Chinese electric vehicle imports

These new EU tariffs will likely prove to be a serious dent in EU car sales in China for both BEV and ICE, as we can expect a reaction from China on their imports of vehicles from the EU. In particular, German car manufacturers such as BMW, Mercedes-Benz and VW are massively dependent on results in the Chinese market, and so I see major difficulties looming for these three. BMW, for example, exports its 4 Series and 7 Series from the EU to China. The country is a huge sales market for Porsche and is served entirely from Europe. And Audi also exports numerous vehicles to China, as a spokesperson estimated: "We are expecting around 60,000 units for 2024. Hence I think they will ultimately be the ones who suffer, not the Chinese manufacturers. The EU tariffs will ultimately make EVs less affordable and less accessible to many in society within the EU. Consequently European consumers and the environment will pay the price - a real failure for Europe and a disaster for the reigning EPP (in German EVP) in my opinion. As for British car manufacturers, or what’s left of them: Maybe the UK will take a different approach - it will be an interesting summer for sure.

Photos courtesy of Michael Brecht.