The European Commission will reveal this week what additional tariffs it plans to impose on Chinese electric vehicles over what it calls excessive state subsidies, a decision that is likely to trigger retaliation from Beijing, Reuters reports.
Almost a month after Washington quadrupled tariffs on electric vehicles from China, up to 100%, Brussels is set to announce much lower tariffs on imports of electric cars made by Chinese manufacturers such as BYD and Geely but also for Western manufacturers, such as Tesla, which exports cars assembled in China to Europe, according to Agerpres.
Brussels’ decision comes at a time when European carmakers are struggling with a wave of cheap electric cars offered by Chinese rivals.
However, there is very little support for the Commission’s plans from the European car industry. German carmakers, which are heavily dependent on sales in the Chinese market, fear retaliation from Beijing, and European car firms are importing their own Chinese-made vehicles.
However, European Commission President Ursula von der Leyen has repeatedly said that Europe must act to prevent China from flooding the bloc’s market with subsidized electric cars.
“If provoked, the backlash and repercussions could lead to a trade war that would be devastating for a region that is still heavily dependent on Chinese-dominated supply chains to meet its ambitious climate goals,” says Will Roberts, director of research on automotive sector at Rho Motion.
Analysts expect the additional tariffs to be announced by the European Commission to be between 10% and 25%. Each additional 10% added to the current 10% tariff would cost EU importers of Chinese electric cars around $1 billion based on 2023 trade data, another blow to a sector facing slowing demand and shrinking home prices.
Costs will rise this year as Chinese electric car manufacturers increase exports to Europe.
Imports of electric cars assembled in China have been dominated by Western automakers such as Tesla, Renault subsidiary Dacia, and BMW, but despite this, the European Commission claims that the share of Chinese brands in electric cars sold in the EU has increased to 8%, from to less than 1% in 2019, and could reach 15% in 2025. According to the Community Executive, the prices of Chinese electric cars are typically 20% below those produced in the EU.
Several top executives from BMW, Mercedes and Volkswagen issued a warning about imposing additional tariffs on vehicles from China, where HSBC estimates the German carmakers generate 20-23% of their global profits.
Among European governments, France says Europe needs to protect itself from subsidized Chinese production, while German Chancellor Olaf Scholz says he is not convinced additional tariffs are needed.
Meanwhile, the market is evolving as European automakers team up with Chinese rivals to bring electric cars to market cheaper and faster. In turn, Chinese electric car manufacturers and their suppliers are starting to invest in production in Europe, which will allow them to avoid paying the tariffs.