AutosEurope faces a trade war with the Middle Kingdom EU over tariffs on electric cars

Europe faces a trade war with the Middle Kingdom EU over tariffs on electric cars

Geely car factory - the European Union wants to impose tariffs on electric vehicles of this brand, among others.
Geely car factory - the European Union wants to impose tariffs on electric vehicles of this brand, among others.
Images source: © Getty Images | 2023 VCG
Tomasz Sąsiada

15 June 2024 17:33

The European Commission threatens to impose tariffs on Chinese electric cars if Beijing continues to subsidize producers. EU risks trade clash with China over tariffs on electric vehicles, which could adversely impact the automotive industry.

The European Commission wants to impose individual tariffs on companies: BYD (17.4 percent), Geely (20 percent), and SAIC (38.1 percent). Other electric vehicle manufacturers in China that cooperated in the EC's investigation into subsidies for the Chinese industry by the Beijing government would be subject to a 21 percent tariff. In comparison, those who did not cooperate would face a 38.1 percent tariff.

Last Wednesday, the European Commission announced that it had asked the Chinese authorities for an agreement on subsidies and EU tariffs. If talks with Beijing do not result in an agreement, temporary EU tariffs will be introduced from 4 July.

Chinese Foreign Ministry spokesman Lin Jian responded that the additional tariffs violate market economy principles. The Chinese Ministry of Commerce called on the EU to immediately eliminate improper actions. The Ministry of Foreign Affairs and the Ministry of Commerce stated that "China will take all necessary measures to firmly safeguard the legitimate rights and interests of Chinese enterprises and nationals," but did not specify what these measures would involve.

"We may quickly regret this decision"

According to the President of the Association of Distributors and Manufacturers of Automotive Parts (SDCM) and a member of the board of the European Association of Automotive Suppliers (CLEPA), the EC's decision to impose higher tariffs on imported Chinese electric cars risks Beijing's retaliation, potentially leading to a trade war with negative consequences for European parts manufacturers.

SDCM's president pointed out that imposing punitive tariffs on Chinese electric vehicles at such a critical time for the European automotive industry, as it is undergoing the biggest transformation in history. It must switch to zero-emission drives, which, in the EU's view, only battery electric vehicles (BEVs) and hydrogen vehicles (FCEVs) provide. Their social acceptance, charging possibilities, and, above all, the price reflected in limited demand are still far from desirable, affecting European manufacturers' conditions. China produces much cheaper, high-quality vehicles, so their sales are growing rapidly.

Are tariffs not the solution?

According to the SDCM president, imposing tariffs on vehicles from China will not be enough to protect the competitiveness of the European industry and ensure a fair transformation in the automotive sector. "Without simplifying procedures, changing public aid rules, and providing incentives for private investors, the EU's climate goals will not be achieved, or they will be achieved at the expense of the European economy and the automotive industry."

"Tariffs, unfortunately, will not remedy all the industry's woes. We could very quickly make our situation worse. China is already announcing, though in a veiled way, retaliatory measures," he adds. The head of the European Association of Automotive Suppliers CLEPA, Benjamin Krieger, holds a similar view.

"The European Commission is right to be concerned about the competitiveness of the EU as a manufacturing hub and the challenges posed by Chinese manufacturers, but tariffs can only provide a temporary respite and bear the risk of retaliation. Global trade requires a level-playing field and may necessitate corrective measures. However, protectionism cannot be the answer to restoring European competitiveness. Consolidated efforts are needed to make the EU attractive again for investment," he argues.

"Even Chinese-built BEVs often incorporate many components and technologies manufactured by European suppliers. Vehicle manufacturers and suppliers are accelerating product development cycles and investing roughly €70 billion annually in R&D to reinforce their competitive edge," he adds.

According to CLEPA, Europe's main challenge is not a lack of innovation potential but high energy costs, regulatory inconsistencies, and limited access to capital and public funding, which are increasingly leading to innovation abroad.

The European Commission initiated an investigation into Chinese subsidies for electric vehicle manufacturers in October of last year. "Global markets are now flooded with cheaper electric cars. And their price is kept artificially low by huge state subsidies," declared European Commission President Ursula von der Leyen during her annual State of the Union address delivered in the European Parliament last year. Earlier, the United States decided to impose punitive tariffs on Chinese vehicles of up to 100 percent.

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