EU Commission threatens high tariffs on electric cars from China

The EU Commission threatens with high provisional tariffs on electric cars from China. The authority announced this on Wednesday. Whether tariffs of up to 38.1 percent will actually have to be paid, according to the information, depends on whether another solution can be found with China. They would then be retroactively collected from July 4, should the EU agree to impose higher long-term tariffs. Criticism came from China and German car manufacturers. Federal Minister of Economics Robert Habeck (Greens) warned of a "tariff race."

The EU Commission has been investigating since last autumn whether electric cars in China benefit from anti-competitive subsidies. According to the commission, Chinese electric cars are usually around 20 percent cheaper than models made in the EU. EU Commission President Ursula von der Leyen said when announcing the investigation: "The price of these cars is artificially lowered by huge state subsidies - this distorts our market."

The commission has now provisionally concluded that the value chain for battery electric vehicles (BEV) in China benefits from unfair subsidization. As a result, manufacturers in the EU are threatened with damage. Therefore, the commission now threatens with tariffs between 20 and nearly 40 percent. So far, tariffs of ten percent are imposed. According to the information, the new tariffs would be added on top of that. Specifically, a tariff of 17.4 percent is in place for manufacturer BYD, 20 percent for Geely, and 38.1 percent for SAIC. For other manufacturers, 21 percent is provided, and for companies that did not cooperate in the investigation, a tariff of 38.1 percent would be due.

China calls it protectionism

China's Foreign Ministry criticized the investigation as protectionism. The EU is looking for an excuse to impose tariffs against imported cars from China, which violates international trade rules, said spokesman Lin Jian in Beijing. Ultimately, this will harm Europe's own interests. The day before, Lin had already announced that China would not stand idly by and would protect its interests.

The German Association of the Automotive Industry (VDA) criticizes the EU Commission's threat to impose high punitive tariffs on electric cars from China in the future. The president of the German Association of the Automotive Industry (VDA) sees the tariffs as an obstacle to global cooperation. The risk of global trade conflicts increases, she emphasized. "The fact is also: Countervailing duties for electric cars imported from China are not suitable for strengthening the competitiveness of the European automotive industry," she said on Wednesday. However, it is also up to China to approach Europe with constructive proposals. The German Chamber of Industry and Commerce (DIHK) also warned that the move could lead to stronger trade conflicts.

Measures against German car manufacturers could follow

China is the largest car market in the world and therefore extremely important for German car manufacturers - countermeasures would affect German car manufacturers. BMW, for example, exports the 4 Series and the 7 Series from the EU to China. The Munich-based company does not provide information on volumes. Porsche would also be affected if China reacted with countermeasures. The vast country is one of Porsche's most important markets and is completely supplied from Europe. Audi also exports numerous vehicles to China. "For the year 2024, we expect around 60,000 units," the company announced. 

At Mercedes, around 30 percent of sales last year were in China. The Wolfsburg core brand VW even sold almost 50 percent of its cars there in 2023, but mainly supplies the market from local production. According to calculations by the consulting firm JSC Automotive Consulting, which regularly evaluates registration numbers in China, only 0.6 percent of the vehicles sold by the VW brand in 2023 were import models. Audi came to 9 percent, BMW to 13 percent, and the Mercedes-Benz Group to 20 percent. Due to the lack of local production, Porsche's quota was 100 percent.

In the "Middle Kingdom," a fierce price war has long been raging among the e-car brands. German brands want to compete with rivals such as US automaker Tesla and Chinese brands like BYD or Nio. BMW, Mercedes, VW, and other companies could be the first target of possible Chinese countermeasures. As recently as May 22, the Chinese Chamber of Commerce in Brussels warned of this possibility. They had been informed by "insiders" that China was considering imposing tariffs of 25 percent on imported vehicles with large engines, the Chamber said in a statement on X.

BMW, VW and Co. also manufacture in China for export

France's President Emmanuel Macron has in the past fundamentally expressed himself positively about punitive measures against China's electric cars, in contrast to German voices. In early May, he said in an interview with "The Economist" that it could not be that European manufacturers are disadvantaged by European subsidy rules and different tariffs compared to Chinese companies. Auto experts like Ferdinand Dudenhöffer see Macron's stance as an attempt to protect French carmakers like Renault and Peugeot. Moreover, French car brands have hardly any market share in China and do barely any business there - unlike the Germans.

German companies could meanwhile be affected not only by countermeasures but also by the EU measures themselves - because they also produce in China for export. For example, Mini manufactures the electric Cooper introduced to the world market in May together with the Chinese car manufacturer Great Wall in China. In the VW Group, only the new Cupra Tavascan, which is to be launched in the fall, could be affected. It is the first and only model in the group built in China and exported to Europe. BMW imports the iX3 from China into the EU. Mercedes builds the Smart vehicles together with its major shareholder Geely entirely in Xi’an, China, and also exports them to Europe. From the Commission, it was said on Wednesday that it had not explicitly investigated which models of German manufacturers could face which tariffs.