By T. Jayani, JadeTimes News
The European Union has increased tariffs on Chinese electric vehicles (EVs), a measure aimed at protecting its motor industry. These new tariffs, ranging from 17.4% to 37.6% for individual manufacturers, add to an existing 10% duty on all electric cars imported from China. This decision is expected to raise the prices of EVs across the EU, potentially making them less affordable for European consumers.
This move significantly impacts Beijing, already engaged in a trade war with Washington. The EU is China's largest overseas market for EVs, and the country relies on high tech products to help revive its struggling economy. EU officials argue that the rise in imports is due to "unfair subsidization," which allows Chinese made EVs to be sold at much lower prices than those produced within the EU. China denies these allegations, stating that it is not subsidizing excess production to flood Western markets with cheap imports.
The new tariffs take effect on Friday but are provisional while the investigation into Chinese state support for the country's EV manufacturers continues. Final implementation is not expected until later this year. The tariffs impact not only Chinese brands but also Western firms manufacturing cars in China. Brussels states that the tariffs are an attempt to correct a distorted market. The EU’s move, although less severe than the recent US decision to raise tariffs to 100%, could have a more significant impact, given the higher presence of Chinese EVs in the EU compared to the US.
The share of Chinese EVs in the EU market has risen from 0.4% in 2019 to nearly 8% last year, according to Transport and Environment (T&E). Brands like BYD and SAIC could reach a 20% market share by 2027. However, the new tariffs will not affect all Chinese made EVs equally. They are based on estimates of state aid each firm received, with companies cooperating with the probe receiving lower duties.
SAIC faces the highest new tariff at 37.6%, affecting its partnership with Volkswagen and General Motors, and its MG brand, a top selling EV in Europe. BYD, China's largest EV maker, faces an extra duty of 17.4%, the lowest increase among the targeted brands, giving it an advantage in the European market. Geely, owner of Volvo, will see an additional tariff of 19.9%.
European car manufacturers operating in China will also be affected. Companies deemed cooperative with the investigation will face an extra duty of 20.8%, while those seen as non cooperative will pay 37.6%. US based Tesla, the largest exporter of EVs from China to Europe, has requested an individually calculated rate, to be determined at the end of the investigation. Tesla has warned that prices for its Shanghai made Model 3 could increase due to the new tariffs.
The new tariffs are expected to cut the number of Chinese made EVs entering the EU, easing pressure on local manufacturers. Additionally, some major Chinese EV firms are planning to build production capacity in the EU to shield themselves from the new duties. BYD is already working on its first European factory in Hungary, set to begin production by the end of next year. Chery has signed a joint venture with a Spanish firm to make EVs in Barcelona, and SAIC is looking for a site for its first factory in Europe.
Bill Russo from Automobility states that the EU’s strategy encourages companies to invest in the region rather than rely on exports from China. The varying tariff levels signal the EU’s intent to adjust penalties based on a company's commitment to investing in the EU.
China's government has heavily invested in the EV industry, with over $230 billion in state support since 2009. As a result, China’s EV industry has become world leading, accounting for over 60% of global new electric car sales last year. While most EVs produced in China are sold domestically, exports, particularly to Europe, have become increasingly important. However, with major markets like the US and the EU imposing tariffs, China’s strategy to "export its way out" of economic slowdown may face significant challenges, potentially deepening trade tensions with its largest trading partners.
