EU votes yes to Chinese BEV tariffs
BY COBEY BARTELS | 6th Oct 2024
THE European Union now has the green light to impose tariffs as high as 45 per cent on Chinese-built battery electric vehicles following a vote over the weekend in which 10 EU members backed the move, five voted against it and 12 abstained.
From the end of this month, tariffs of up to 45 per cent could be implemented for five years, resulting from a year-long investigation by the European Commission into Chinese state subsidies for domestic vehicle manufacturers.
Chinese auto-makers such as SAIC (parent of MG, LDV and others) and Geely (which controls brands including Volvo, Polestar, Lotus, LEVC, Zeekr, and Lynk & Co) will face the steepest tariffs of 35.3 per cent and 18.8 per cent respectively.
BYD will face a 17 per cent tariff, and Tesla, which also exports vehicles from China, will be levied 7.8 per cent. Other cooperating companies are projected to be charged with a 20.7 per cent tariff.
These levies will be imposed on top of the existing 10 per cent import duty currently applied to Chinese electric vehicles entering the European market.
Germany, the EU’s largest economy and automotive hub, opposed the move alongside four other countries while France, Italy, the Netherlands, and Poland supported the tariffs, aiming to protect European industries from what the EU perceives as unfair competition due to China’s state-backed support of its electric vehicle manufacturers.
Beijing has denied these claims and has threatened retaliatory tariffs on European dairy, brandy, pork, and automotive sectors.
Despite opposition from key players like Germany, blocking the move would have required at least 15 countries – or 65 per cent of EU members – to oppose the tariffs.
German federal minister for economic affairs and climate action Robert Habeck had warned that imposing the duties could lead to a tariff war, with the VDA, Germany’s counterpart to Australia’s Federal Chamber of Automotive Industries, expressing concerns over the potential repercussions.
In a sign of rising tension, the Chinese government has indicated it may raise import duties on large internal combustion engine (ICE) vehicles – a move that could disproportionately affect German car-makers.
Additional tariffs have already impacted Chinese auto-makers, with sales in the EU plunging 48 per cent in August to an 18-month low.
The EU and China are continuing negotiations in an attempt to reach a compromise that would allow for the regulation of prices and export volumes, potentially avoiding the need for these tariffs.
Both sides are exploring whether an agreement that complies with World Trade Organization (WTO) rules while addressing the EU’s concerns over Chinese auto-maker subsidies.
The stakes are high as during the past three years, the share of China-sourced electric vehicles sold in the EU rose from three per cent to more than 20 per cent.
Global brands that manufacture vehicles in China, including Tesla, contribute significantly to the overall figure, although Chinese-owned car-makers account for around eight per cent of the total, according to Bloomberg.
The looming tariffs are part of broader efforts by the EU to reduce dependencies on China.
Former European Central Bank president Mario Draghi has warned that China’s state-sponsored competition poses a serious threat to the EU’s economic stability and could leave it vulnerable to coercion.
Bloomberg reports that the EU did €739 billion ($A1.24 trillion) in trade with China last year, making these decisions critical to the bloc’s future.
As negotiations continue, Chinese auto-makers must decide whether to absorb the tariffs or pass the costs on to consumers.
Some are already quite advanced in establishing European production facilities to circumvent the duties.
