The European Commission’s investigation into anti-subsidies for Chinese-made electric cars is said to be one of the most significant of its kind.
advertisementChinese-made battery electric vehicles (BEVs) will soon be subject to import tariffs when they enter the European Union’s borderless market, where demand for such environmentally friendly products has surged in recent years.
European Commission Announced The first brand-specific provisional decisions under the anti-subsidy investigation into China-assembled BEVs were handed down on Wednesday.
- BYD: 17.4%
- Geely: 20%
- SAIC: 38.1%
- Other Chinese BEV manufacturers who participated in the survey but were not individually sampled: 21%
- Other Chinese BEV manufacturers that did not cooperate: 38.1%
This level is on top of the existing 10% import tariff and contradicts industry expectations of 20% and suggests that the Commission’s findings are significantly more damaging.
The measures are set to be introduced in early July if China cannot present convincing and effective solutions to correct its unfair trade practices. China has long refused to negotiate with Western allies to resolve frictions and often denies the source of the problems themselves.
In practice, the decision means that both Chinese and Western brands that operate factories in the Asian country will be affected by the increase, although not equally. The main companies surveyed are based in Shenzhen. BYDis seeking 5% of the European Union’s BEV market, while sector leader Tesla has submitted a “substantiated request” that could see tailor-made tariffs approved later this year.
“This is based on the clear evidence of our extensive investigation and with full respect for the WTO. [World Trade Organisation] “The rules have been breached and we will now consult with the Chinese authorities and all parties involved to complete this investigation,” said Valdis Dombrovskis, the European Commission’s executive vice-president for trade.
“Our goal is to restore a level playing field and ensure that the European market remains open to Chinese electric car makers, as long as they follow globally agreed trade rules,” he added.
Market share: 7.3%
Brussels is deeply concerned that Beijing’s heavy subsidies will make it difficult for European companies to compete with Chinese manufacturers and ultimately drive them out of an increasingly lucrative sector, as happened with solar panels.
According to Eurostat, sales of Chinese-made BEVs are set to soar from 57,000 new car sales in 2020 to more than 437,000 in 2023, including models from Western brands such as BMW, Renault and Tesla. Over the same period, the value of these transactions has risen from 631 million euros to 9.66 billion euros.
a study According to a study by the Department for Transport and Environment (T&E), Chinese brands’ share of the EU BEV market is set to surge from 0.4% in 2019 to 7.9% in 2023, and could exceed 20% by 2027 if the trend continues.
The Committee has already found that China has multifaceted government assistance in the form of subsidies, low-interest loans, government-backed credit, tax rebates, VAT exemptions and discounts on goods and services.
The key points of Ursula von der Leyen’s investigation, which was officially launched in October, are: State of the Union AddressThe aim of the study is to determine whether this support is likely to result in “damage” to EU industry in future – in other words, unsustainable losses in sales volumes, profit margins and market shares.
The provisional decision, published on Wednesday, indicates that the Commission believes the threat is real and that drastic measures are needed to avert the worst-case scenario.
The move is almost certain to anger Beijing. Said It will not “stand idly by” while tariffs are introduced and will target the EU’s agriculture and aviation sectors for retaliation.
Beware of gaps
The additional tariffs are intended to increase the sales costs of Chinese-made BEVs in the EU and bring their final prices closer to those of their European rivals, with the ultimate goal of ensuring fair competition.
It remains to be seen how much that gap will narrow.
Chinese companies sell BEVs in Europe at much higher prices than they do in their home countries — what Rhodium Group calls the “EU premium” — which gives Chinese companies ample room to absorb the tariffs, potentially allowing them to do so domestically without necessarily translating into higher prices for consumers.
Beyond government support, Chinese manufacturers benefit from low labor and energy costs, easy availability of raw materials, and a strong ecosystem for mass-producing batteries. Moreover, China’s economy has slowed due to weak domestic demand, making companies more reliant on exports abroad.
advertisement“Tariffs of 40-50% (and even higher for vertically integrated manufacturers like BYD) would be needed to make the European market unattractive for Chinese EV exporters,” the Rhodium Group said in a report. April Report.
Still, imposing such surprise tariffs would be risky for Brussels, with EU member states divided on how tough the EU should be in response to Beijing’s unfair practices.
Member states will vote in November to make the temporary measures permanent. Repealing the taxes requires a special majority vote, a threshold that is rarely reached but is by no means impossible.
All eyes will be on Germany, the world’s leading car exporter, which has been expanding its presence in China and becoming increasingly dependent on the Chinese market for decades.
The Association of the German Automotive Industry (VDA), which is backed by BMW, Mercedes-Benz and Volkswagen, has already made clear its opposition to the additional tariffs, saying they are “not conducive to strengthening the competitiveness of the European car industry” and risk sparking a “major trade dispute”.
advertisementPressure from industry and divisions within Chancellor Olaf Scholz’s three-party coalition government mean the German government is expected to reject the tariffs in November.
Hungary, which has attracted investment from BYD, is also seen as a likely opponent, and other liberal countries such as Sweden and Ireland have also expressed concerns but have not explicitly opposed the tariffs.
Meanwhile, France, whose automakers have low exposure to the Chinese market, is widely seen as a key supporter of the investigation. Italy recently voiced its support for the initiative, calling on the EU to follow the lead of the United States, where President Joe Biden announced a 100% tariff on Chinese-made BEVs.
