EU Commission threatens high punitive tariffs on e-cars from China

The EU Commission is threatening to impose high provisional punitive tariffs on e-cars from China. This was announced by the authority on Wednesday. Whether manufacturers actually have to pay the tariffs of up to 38.1 percent depends on whether another solution can be found with China. They would then be withheld retroactively from July 4 should the EU agree to impose higher tariffs in the long term.

An investigation by the EU Commission has been examining whether China is distorting the market with subsidies for its car manufacturers and thus gaining an unfair competitive advantage, and whether appropriate countermeasures are appropriate, since October 2023. French President Emmanuel Macron is among those in favor of additional tariffs, while German Transport Minister Volker Wissing (FDP) rejects them. The Commission has now come to the preliminary conclusion that the value chain for battery electric vehicles (BEV) in China is benefiting from unfair subsidies. The Commission is therefore threatening to impose tariffs of between 20 and almost 40 percent.

In the middle of last month, the USA imposed a levy of 100[ ]percent on electric vehicles from China. The tariff for lithium-ion batteries, provided they are used in electric vehicles, will rise to 25 percent; for other lithium-ion batteries, the tariff will not take effect until 2026. 25 percent duty will also be imposed on battery components.

China's Foreign Ministry criticized this as protectionism and an excuse for the EU to impose tariffs on imported cars from China, which violates international trade rules, said spokesman Lin Jian in Beijing. Ultimately, this would harm Europe's own interests. The previous day, Lin had already announced that China would not stand idly by and would protect its interests.

Fears of resistance

China is the largest car market in the world and therefore extremely important for German car manufacturers - countermeasures would affect German car manufacturers. BMW, for example, exports the 4 Series and the 7 Series from the EU to China. The Munich-based company does not provide any information on volumes. Porsche would also be affected if China were to respond with countermeasures. The country is one of Porsche's most important markets and is served entirely from Europe. Audi also exports numerous vehicles to China. "For 2024, we expect around 60,000 units," the Group announced.

China accounted for around 30 percent of Mercedes' sales last year. VW even sold almost 50 percent of its own cars there in 2023, but serves the market almost exclusively from local production. According to calculations by JSC Automotive Consulting, which regularly analyzes registration figures in China, only 0.6 percent of the VW brand's vehicles sold there in 2023 were imported models. Audi came in at 9 percent, BMW at 13 and the Mercedes-Benz Group at 20 percent. At Porsche, the rate was 100 percent due to a lack of local production.

German manufacturers doubly affected

German brands want to take on competitors such as the US car manufacturer Tesla and Chinese brands such as BYD or Nio in China. BMW, Mercedes, VW and other companies could be the first target of possible Chinese countermeasures. The Chinese Chamber of Commerce in Brussels warned of this possibility on May 22. It had been informed by insiders that China was considering imposing tariffs of 25 percent on imported vehicles with large engines, according to a statement from the chamber on X.

Meanwhile, German companies could not only be affected by countermeasures, but also by the EU measures themselves - because they also produce in China for export. Mini, for example, builds the electric Cooper, which was launched on the global market in May, together with the Chinese car manufacturer Great Wall in China. In the VW Group, only the new Cupra Tavascan, which is due to be launched in the fall, could be affected. It is the first and only model in the Group to be built in China and exported to Europe. BMW imports the iX3 from China to the EU. Mercedes builds the Smart vehicles entirely in Xi'an, China, together with its major shareholder Geely and also exports them to Europe.

(fpi)