16.12.2024
Background
On October 31, 2024, the European Union (EU) began enforcing new import tariffs of up to 45% on electric vehicles (EVs) produced in China. The decision, ratified by EU member states earlier in the month, follows a European Commission investigation which determined that Chinese EV manufacturers receive substantial subsidies. These subsidies, according to the EU, distort competition by enabling Chinese vehicles to be sold in Europe at prices up to 20% lower than locally manufactured counterparts.
Tariffs in detail
The new tariffs vary by manufacturer:
- BYD: 17%
- Geely: 18.8%
- SAIC Motor: 35.3%
- Tesla (China): 7.8%
These tariffs are in addition to the existing 10% EU import duty on EVs. The Commission has stated that the tariffs aim to safeguard the future of the EU automotive industry, promoting fair competition and protecting jobs in the sector.
Industry reactions
The response from European automakers has been mixed. While some view the measure as a necessary step to protect the domestic industry, German automakers—such as Volkswagen, BMW, and Mercedes—have expressed concerns about potential retaliatory actions from China. As the world’s largest automotive market, China is crucial to their operations, both as a sales market and a production hub.
In Germany, the automotive industry has lobbied strongly against the tariffs, warning of potential disruptions to global supply chains and increased vehicle costs for consumers. The Association of the German Automotive Industry (VDA) cautioned that higher tariffs might slow down the adoption of EVs, complicating Europe’s push toward carbon neutrality.
China’s potential retaliation
The Chinese government has labeled the tariffs as protectionist and hinted at possible countermeasures. These could include increased duties on European imports like pork, dairy products, and luxury goods. Preliminary measures have already been imposed on European liquor imports, with importers required to pay deposits ranging from 30.6% to 39%.
Impact on negotiations
Despite the implementation of the tariffs, the European Commission remains open to dialogue with China. Both parties have continued discussions aimed at finding a World Trade Organization (WTO)-compliant resolution to address the subsidy issue. However, no agreement has been reached yet.
Implications for the future
The new tariffs underscore the growing tensions between Europe and China in the EV sector. While the EU emphasizes the need for fair competition, the risk of an escalating trade war looms large. For consumers, the tariffs may result in reduced EV model availability and higher prices in the short term.
Meanwhile, European automakers face pressure to innovate and remain competitive in a rapidly evolving market. How this trade dispute will shape the future of the automotive industry remains to be seen.
