EU slaps tariffs of up to 38 per cent on Chinese electric vehicles

BRUSSELS: The European Union (EU) has said it is imposing provisional tariffs on Chinese electric vehicles to counteract what it called unfair subsidies received by Chinese EV makers.

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

Read more: China puzzled by EU probes on EVs, solar panels, wind turbines

The EU said the new tariffs are to counteract what it called “unfair” subsidies Chinese electric vehicles 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 per cent import duties. A final decision on the tariffs is set for November as Brussels and Beijing aim to resolve the conflict through negotiations.

“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 per cent to 37.6 per cent 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.

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.

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 per cent tariff on vehicles made in China. Companies that did not cooperate will face a 37.6 per cent tariff.

The Commission estimates that Chinese brands have increased their share of the EU market to 8% from less than 1 per cent in 2019 and could reach 15 per cent by 2025. It also pointed out that Chinese EVs are generally priced 20 per cent 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 per cent tariff on Chinese EV imports starting in August.

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 per cent on top of the current 10 per cent 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 labuor and manufacturing costs compared to China.

However, Volkswagen, Europe’s largest carmaker, swiftly criticised 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.

Read more: EU-China EV tariffs: German carmakers fear backlash

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 per cent cheaper than EU-made models, Reuters reported.