The measures are “a speeding fine aimed at slowing down China,” said Bill Russo, founder and CEO of Shanghai-based consultancy Automobility.
By Alberto Nardelli and Jorge Valero
The European Union will impose additional tariffs on electric cars shipped from China from next month, raising duties as high as 48%, a move that will further escalate trade tensions and raise the cost of buying an electric car.
The bloc has formally notified carmakers including BYD, Geely and MG owner SAIC of tariffs on battery-electric cars due to be introduced around July 4, the European Commission said, following a probe into subsidies that began last year . China’s EV makers have pushed more aggressively into Europe amid a domestic price war, building a lead in the technology for years.
The individual tasks will vary depending on the level of cooperation with the investigation, the EU said, and will involve SAIC Motor Corp. hit hardest. The state-owned company owns the British brand MG, whose mass-market models such as the MG4 are among the leaders in Europe. SAIC’s rates are expected to increase by 38.1% on top of the existing 10% duty.
“The EU ignored the facts and WTO rules, ignored repeated strong objections from China, and ignored the calls and discouragements from the governments and industries of many EU member states,” China’s Commerce Ministry said in a statement. Beijing will “take all necessary measures to firmly protect the legitimate rights and interests of Chinese companies.”
In addition to SAIC’s top rate, BYD will have to pay an additional 17.4% levy, and Geely – owner of Volvo Car AB – will have to pay an additional 20% levy. While the investigation focused on Chinese-owned electric cars, Western carmakers including Tesla, BMW and Renault, which produce in China and ship to the EU, are also facing higher costs. Those who participate in the study will be charged an additional fee of 21% based on a weighted average.
The measures are “a speeding fine aimed at slowing down China,” said Bill Russo, founder and CEO of Shanghai-based consultancy Automobility. “These are Chinese companies that are leading the way – let’s slow them down and let’s encourage them to maybe lower rates with localization.”
Nearly a fifth of battery-electric vehicles sold in the EU in 2023 were made in China, according to lobby group Transport & Environment. That figure is expected to rise to 25% this year, T&E said.
China has threatened retaliatory measures in agriculture, aviation and large-engine cars. Beijing has already launched an investigation into certain types of European spirits.
“Our aim is to restore the level playing field and ensure that the European market remains open to electric vehicle manufacturers from China, provided they adhere to globally agreed trade rules,” said Valdis Dombrovskis, vice president of the European Commission and responsible for trade. said Wednesday.
Shares of Chinese EV makers fell in Hong Kong. Geely and Xpeng Inc. fell by more than 5%, while sector leader BYD lost as much as 3.9%.
The measures come as the EU walks a tightrope in its efforts to protect the region’s auto industry, which provides millions of good-paying jobs, while pursuing a green agenda focused on removing CO2 from transport. The EU’s EV ambitions, with an effective ban on the sale of combustion engines for new cars by 2035, have run into trouble in recent months after markets such as Germany withdrew subsidies for consumers.
The tariffs are likely to cut imports from China by a quarter, worth roughly $4 billion, said Moritz Schularick, president of Germany’s Kiel Institute for the World Economy.
Although the decision was justified in light of local government support, “the expected increase in electric vehicle prices will make the climate transition more expensive,” Schularik said. “Finding the right balance between fair competition and promoting green technologies remains an important challenge.”
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German Chancellor Olaf Scholz has warned against limiting car trade with China, saying earlier this month that “we do not close our markets to foreign companies, because we do not want that for our companies either.” German carmakers, including Volkswagen and BMW, would be hardest hit by a trade row as they sold a combined 4.6 million cars there in 2022.
Western manufacturers have broadly rejected the tariffs, with Mercedes-Benz Group AG CEO Ola Källenius leading calls for open markets. The luxury car maker considers China its largest market, with 36% of total deliveries, and is particularly vulnerable to retaliation because it imports all its lucrative S-Class sedans and Maybach limousines into China. The country is also the largest market for VW and BMW.
“The timing of the decision is detrimental to current demand” for electric vehicles, VW said in a statement on Wednesday. “The increase in import tariffs in the EU could trigger a fatal dynamic of measures and countermeasures and result in an escalation of trade conflicts.”
The EU has opened a barrage of trade investigations against Beijing over anti-dumping and unfair subsidies, especially in the clean technology sector, after losing much of the solar energy sector to China a decade ago. The moves on electric vehicles follow the US, which last month introduced a tariff of more than 100% on Chinese imports of electric vehicles, although the move is more symbolic as few vehicles are currently being shipped.
The final duties are expected to be determined in November.
The EU’s move comes as the outlook for electric vehicle sales declines, with BloombergNEF cutting its sales forecasts for battery electric vehicles through 2026 in a new report on Wednesday. BNEF sees China continuing to dominate EVs, batteries and the global supply chains for raw materials and components.
China has urged Brussels to refrain from imposing the fines and has signaled its willingness to impose tariffs of up to 25% on imported cars with large engines, hitting brands such as Porsche, Mercedes and BMW. In recent weeks, Trade Minister Wang Wentao and other officials have been crisscrossing Europe to push back on their plea to Brussels.
This included a letter Wang sent to Dombrovskis, the EU’s trade chief, threatening action against the aviation and agricultural industries. Brussels has long argued that its procedure is based on WTO rules.
First print: June 12, 2024 | 11:59 PM IST