The European Union will impose tariffs of up to 37.6% from Friday on imports of electric vehicles made in China, EU officials said, ratcheting up tensions with Beijing in Brussels’ largest trade case yet.
There is however a four-month window during which the tariffs are provisional and intensive talks are expected to continue between the two sides as Beijing threatens wide-ranging retaliation.
The European Commission’s provisional duties of between 17.4% and 37.6% without backdating are designed to prevent what its president Ursula von der Leyen has said is a threatened flood of cheap EVs built with state subsidies.
The rates, laid out in a 208-page document published on Thursday, are almost the same as those announced by the Commission on June 12. The executive made adjustments after companies identified minor calculation errors in the initial disclosure.
Beijing said then it would take “all necessary measures” to safeguard China’s interests.
These could include retaliatory tariffs on exports to China of products such as cognac or pork.
EU trade chief Valdis Dombrovskis said there is no basis for China to retaliate.
“Our aim is to … ensure fair competition and a level playing field,” he said in an interview with Bloomberg.
The EU anti-subsidy investigation has nearly four more months to run.
At the end of it, the Commission, the EU’s executive arm, could propose definitive duties, typically applying for five years, on which EU members would vote.
“Those talks with China are ongoing and indeed should a mutually beneficial solution emerge, we can also find ways not to apply at the end of the day the tariffs,” Dombrovskis said.
“But it is very clear this solution (would) need to solve that market distortion that we are currently having … and it needs to be market compliant.”
China’s commerce ministry said on Thursday both sides have so far held several rounds of technical talks over tariffs on the issue.
“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,” He Yadong, a ministry spokesperson, said.
BYD (002594.SZ), opens new tab faces duties of 17.4%, Geely (GEELY.UL) 19.9% and SAIC 37.6%, the EU said on Thursday.
These are on top of the EU’s standard 10% duty on car imports.
Companies deemed to have cooperated with the anti-subsidy investigation, including western carmakers Tesla (TSLA.O), opens new tab and BMW (BMWG.DE), opens new tab, will be subject to 20.8% tariffs and those that did not cooperate a rate of 37.6%.
Chinese EV makers will have to decide whether to absorb the tariffs or raise their prices to cover the billions of dollars in new costs at European borders.
“Chinese automakers are desperate to expand their sales outside of China since the domestic price war is taking its toll,” said Tu Le, founder of consultancy Sino Auto Insights.
Increased EV costs for European consumers would undermine the EU’s goal of being carbon-neutral by 2050, opponents of the tariffs say.
Chinese brands MG and Nio (9866.HK), opens new tab suggested on Thursday they might raise prices in Europe later this year.
Tesla said last month it planned to increase the prices of its Model 3.
The prospect of duties may spur Chinese automakers to invest in factories in Europe, although labour and manufacturing costs are higher than in China.
On Thursday, Xpeng (9868.HK), opens new tab became the latest EV maker to consider setting up manufacturing in the region to avoid the tariffs.
Europe’s biggest carmaker Volkswagen (VOWG_p.DE), opens new tab was swift to criticise 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.
Auto industry executives have warned against the tariffs, fearful of counter-measures that could affect the competitiveness of their cars in China where they are already struggling to keep up with a growing number of domestic competitors.
German carmakers made a third of their sales last year in China.
The Commission has estimated Chinese brands’ share of the EU market has risen to 8% from below 1% in 2019 and could reach 15% in 2025. It says prices are typically 20% below those of EU-made models.
WAVERING EU SUPPORT
European policymakers are keen to avoid a repeat of what happened with solar panels a decade ago, when the EU took limited action to curb Chinese imports and many European manufacturers collapsed. The EU launched its anti-subsidy investigation into Chinese EVs last October.
The issue will be put to EU members in an advisory vote in the coming weeks, the first official test of support in the Commission’s case, which is the first trade case of this kind.
Although the Commission initiated its investigation without an industry complaint, members are wavering over whether to back the additional tariffs, highlighting Brussels’ challenge in getting support for the case.
The Chinese Passenger Car Association has said the tariffs will have a modest impact on the majority of Chinese firms.
The rates are far lower than the 100% tariff Washington plans to apply to Chinese EV imports from August.
