So, what are the details, how will they impact the industry and how much cars are on dealer shelves?
How much is the customs duty?
The tariffs are aimed at countering perceived government subsidies to China’s auto manufacturing industry, which allow exports to sell for cheaper prices than global rivals.
This is the result of a nine-month investigation into allegations of unfair government subsidies for Chinese battery electric vehicles (BEVs), with the level of tariffs varying by brand.
MG’s parent company SAIC faces the highest tariffs. Geely, which owns a stake in Volvo, faces a 20% tariff. BYD brands such as the Dolphin and Seal, which were launched in the EU last year, will be hit with a 17.4% tariff.
EV makers that cooperate with the EU investigation will be hit with a 21% tariff, while those that don’t will be hit with the highest tariff of 38.1%.
A 17.1% tariff would increase the price of an entry-level €30,000 car by €5,250, while a 38.1% tariff would increase the price by €11,450.
The taxes are on top of an existing 10% tariff on cars imported into the EU, meaning Chinese-made EVs will be subject to a total tariff of up to 48%.
When does it start?
In theory, that date is July 4, but Chinese companies have until then to provide evidence to challenge the EU’s findings, which could lead to the tax rates being adjusted.
The European Commission has indicated it hopes to resolve the dispute through talks before the tariffs provisionally come into effect on July 4.
If consumers have ordered a car before this date and the price has already been locked in, they should avoid a price increase but should check what the contract says.
The EU believes that conglomerates like BYD can absorb the level of subsidies and compete with European rivals by not passing on the tariffs entirely to consumers.
What is the extent of the Chinese government’s alleged support?
The EU argues that every step of the EV manufacturing process – from the mines that produce the lithium used in the batteries to transporting the cars to Rotterdam or Zeebrugge – is subsidised in China by governments at national, regional and local levels.
The investigation also found that land was being provided to auto factories at low cost or free of charge.
The investigation found that in some cases, lithium and batteries were allegedly provided at below market prices, and that battery suppliers were acting as public agencies implementing national industrial policy, as well as granting tax exemptions to the battery sector.
The investigation uncovered a series of preferential financing measures, including green bonds issued at lower interest rates than those available in international markets and preferential refinancing rates for funds allocated to support the green sector. Xi Jinping wants to achieve global dominance in green technology, which also includes solar panels, heat pumps and wind turbines.
What will be the impact on the industry in Europe?
The EU argues that government support not only allows Chinese auto suppliers to directly undercut European rivals, but also slows the EU’s transition from internal combustion engines (ICE) to battery electric vehicles, which it plans to end new sales of ICE vehicles by 2035.
According to the EU, Chinese-made cars will account for 25% of the EU market in 2023, up from 3.9%.
The EU argues that the brutal trade war with China that has driven down prices at home is now being played out in Europe, with China effectively forcing EU manufacturers to suppress prices at home, thereby damaging EU interests and the potential for future investment.
What do the Chinese say?
Chinese foreign ministry spokesman Lin Jian said the EU investigation was a “classic example of protectionism” and that the tariffs would undermine China-EU economic cooperation and the stability of global auto production and supply chains.
He said Beijing would take all necessary measures to “firmly safeguard” its rights and interests.
What does the German government say?
China is not happy: Not only are its automakers facing competition at home, but a looming trade war will hurt exports to China.
“The European Commission’s punitive tariffs are hitting German companies and their core products,” German Transport Minister Volker Vissing said.
China is a key market for German automakers, particularly Volkswagen, Europe’s largest carmaker, which has a joint venture with SAIC.
Finance Minister Olaf Scholz said half of the electric cars imported from China were made by Western manufacturers.
What does the German carmaker say?
After the EU announcement, Volkswagen said it would reject the imposition of tariffs.
“The negative impacts of this decision outweigh the potential benefits for the European, and particularly German, auto industry,” a Volkswagen spokesman said.
Germany’s car industry association, the VDA, said it supported “free and fair trade”.
Mercedes-Benz Chief Executive Ola Källenius joined the concerns, saying: “As an exporting country, the last thing we need is increased trade barriers.”
What about other manufacturers?
Sweden’s Volvo said it was “analysing” developments in the investigation, Vauxhall parent Stellantis said it “does not support steps that divide the world”, and Chinese electric vehicle maker NIO said “this approach will hinder rather than promote global environmental protection, emissions reduction and sustainable development”.
