An expected move by the European Commission to raise Chinese EV tariffs could launch negotiations amid hopes to soften the blow for China, according to Reuters.
Chinese executives hope the talks will soften the blow to the world’s largest electric vehicle (EV) industry. The preliminary tariffs, expected by June 5, will come as a shock, representing billions of dollars in new costs for Chinese EV makers.
However, both Europe and China have reasons to want a deal. China’s electric vehicle industry needs lucrative exports to the world’s third-largest economy to counter falling profits in the domestic market. At the same time, German car makers want access to the Chinese car market and EV partnerships to cut costs.
According to trade data for 2023, every additional 10 per cent of European Union duties on top of the existing 10 per cent levies will cost Chinese EV exporters about $1 billion. That price tag will rise this year as Chinese EV manufacturers expand exports to Europe.
The duties will be imposed from the beginning of July, but can be applied retroactively to the previous three months. At the same time, China has signalled that it is preparing alternatives for the upcoming negotiations. The tentative EU duties could be challenged or even cancelled if a large enough proportion of EU governments oppose them after four months.
Raising EV tariffs
The Chinese Chamber of Commerce to the EU said last week that Beijing was considering raising tariffs on large-engine car imports to 25 per cent. China also floated the idea of reducing duties on car imports from the EU from 15 per cent to 10 per cent.
Meanwhile, the European Commission warned BYD, SAIC and Geely that they had not provided enough information in response to the subsidy investigation. This could pave the way for higher tariffs for these companies, which could set a model for setting fees for the rest of China’s industry.
The European decision comes after the United States quadrupled tariffs on Chinese electric vehicles to 100 per cent. Tesla‘s Elon Musk condemned the move, warning that Chinese car makers were going to “demolish most other car companies.” Tesla, China’s biggest exporter of EVs, also faces the threat of increased EU tariffs.
Trade wars
European automakers are teaming up with new Chinese EV makers to bring EVs to market cheaper and faster. In April, Volkswagen and BMW pledged more than $5 billion to expand research and production in China.
Chinese electric car makers and suppliers are also investing in Europe. Xpeng entered the French market this month. At the opening of the Nio showroom in Amsterdam last week, founder William Li stated that the Chinese EV manufacturer would forge ahead in Europe.
BYD is building an EV plant in Hungary and eyeing a second plant in Europe. Chery Auto, China’s largest car maker by exports, is working with Spain’s EV Motors to open its first European plant in Catalonia.
State-owned SAIC, China’s second-largest car exporter, is also looking for its first plant in Europe. CATL, the world’s largest battery maker, has increased production in Europe. At the same time, other Chinese battery suppliers are helping France build its “battery valley.”
Stellantis CEO Carlos Tavares has previously called for higher Chinese EV tariffs ahead of the partnership with Leapmotor. He stated this month that the tariffs were “a major trap.”
We will try to be Chinese ourselves. Instead of being purely defensive vis-à-vis the Chinese offensive, we want to be part of the Chinese offensive.
