Proposed EU-China tariff passed

THE European Commission will impose import tariffs of up to 38.1 per cent on imported Chinese electric cars from July 4.

The decision aims to protect European car makers from what many have described as a ‘flood’ of cheaper imports and comes less than a month after the United States announced plans to quadruple duties for Chinese EVs to 100 per cent (on top of its existing 7.5 per cent import tariff).

The EC says it will combat what it describes as excessive subsidies with manufacturer-dependant tariffs ranging from 17.4 per cent for BYD models through to 38.1 per cent for majority state-owned SAIC vehicles (including LDV, Maxus, and MG).

The new tariff comes on top of the EU’s standard 10 per cent import duty already in effect.

According to Reuters, the newly imposed tariff equates to billions of euros of extra costs for importers at a time when they are struggling with slowing EV demand and falling prices.

As reported by GoAuto earlier this week, European manufacturers are being challenged by the influx of cheaper Chinese imports. The European Commission estimates their share of the EU market has risen to eight per cent over five years and will likely reach 15 per cent by 2025.

It says prices are typically 20 per cent below that of EU-made models – a figure the new tariff aims to equalise.

Responding to the action, Chinese foreign ministry spokesperson Lin Jian said the action is a “typical case of protectionism” and that the new tariffs will damage both Chinese-EU economic cooperation and the stability of global automotive production and supply chains.

Mr Jian said Beijing would take all necessary measures to “firmly safeguard” its legitimate rights and interests.

The Chinese Passenger Car Association (CPCA) seemed less concerned.

“The EU’s provisional tariffs come basically within our expectations, averaging around 20 per cent, which won’t have much of an impact on the majority of Chinese firms,” said CPCA secretary general Cui Dongshu.

“Those exporting China-made EVs that include Tesla, Geely, and BYD still have huge potential for development in Europe in the future.”

In April, Beijing passed a law aimed at strengthening its ability to hit back at such tariffs.

It has already launched an anti-dumping investigation into mostly French-made imports of brandy and cognac in retaliation for the proposed EU import tariffs. More are likely to follow.

Will Roberts, head of automotive research at RHO Motion, told Reuters that while Chinese manufactures should be able to absorb some of the tariff levels into their profit margins, trade retaliation is a highly likely outcome.

“The true test from today’s announcement will be whether Beijing will retaliate in kind, or come to an amicable solution,” he said.

Europe’s largest vehicle producer, Volkswagen, warned that the negative effects of the new tariffs would outweigh any potential benefits for the German automotive industry, while Mercedes-Benz said the tariffs were “the wrong way to go”.

Italy welcomes the EC’s decision, while the French car lobby group, PFA, said the Commission needed to defend European interests against anti-competitive practices.

New EU import tariff by manufacturer (from 4 July 2024):

Reuters contributed to this report.