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Home » China asks EU to repeal EV tariffs, Chery undeterred
China

China asks EU to repeal EV tariffs, Chery undeterred

i2wtcBy i2wtcJune 13, 2024No Comments6 Mins Read
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Liz Lee, Laurie Chen, Nick Carey

BEIJING (Reuters) – China on Thursday denounced European Union tariffs on Chinese-made electric cars as a protectionist move, while its biggest car exporter said the tariffs would not disrupt expansion plans in Europe, including electric car production in Spain this year.

Reactions from China and other countries caught up in the dispute, including European and Chinese automakers, have shown clear opposition to the EU decision and eagerness to de-escalate the situation.

Industry sources say the EU process allows for review, which is why Europe and China are keen to reach a deal in the coming months to avoid billions of dollars in new costs for Chinese electric car makers.

China said it would take “all necessary measures” to protect its interests after the European Commission announced on Wednesday it would impose additional tariffs of up to 38.1% on imported Chinese-made electric vehicles from July.

“We urge the EU to listen carefully to objective and rational voices from all walks of life, immediately correct its wrong practices, stop politicizing economic and trade issues, and properly handle economic and trade frictions through dialogue and consultation,” Chinese Foreign Ministry spokesman Lin Jian said at a regular briefing.

Still, Chery Automobile, China’s largest automaker by export volume, doesn’t seem to be deterred.

Charlie Chan, Chery Automobile’s executive vice president and president of its European operations, said the company plans to start producing EVs by the end of the year at a recently acquired factory in Spain, which will be the automaker’s first manufacturing site in Europe.

He said the facility would help offset the impact of the tariffs. Rivals BYD and Great Wall Motors are also looking to set up manufacturing and assembly plants in the region to ease the economic pain of the tariffs as they seek to sell more low-cost cars to compete with European rivals and make up for sagging sales in China.

Room for solutions

State news agency Xinhua said in an editorial that Brussels appeared to leave room for the two sides to continue talks to find a solution, adding that it hoped “the EU will seriously reconsider and stop moving in the wrong direction.”

The Chinese government has denied claims from the EU and the US that overcapacity in China’s EV industry is threatening foreign automakers through subsidised exports. China argues that tariffs would slow the uptake of EVs, jeopardise climate change goals and raise costs for consumers.

The EU also said it would impose additional tariffs of 17.4 percent on BYD and 38.1 percent on SAIC on top of the standard 10 percent auto tariff to counter Chinese subsidies, bringing the overall top tax rate to almost 50 percent.

Washington also recently unveiled plans to quadruple tariffs on Chinese-made EVs to 100%.

Other automakers have been quieter than Cherry.

Geely Automobile, which owns a majority stake in Sweden’s Volvo Cars, expressed “deep disappointment” and vowed to take “all necessary measures” to protect its rights.

SAIC Motor, a state-owned company that will become China’s biggest automaker through joint ventures with Volkswagen AG and General Motors Co, said it was deeply concerned about the tariffs.

SAIC has been China’s largest automaker for nearly two decades, but sales have been under pressure and the company is cutting jobs, Reuters reported.

The EU has made clear that European regulators would view Chinese state-owned banks and government-owned loans as subsidies and subject them to additional tariffs.

In a sign that China has little intention of scaling back its support, the Shenzhen city government on Thursday announced measures to encourage new vehicle and power grid integration, including subsidies of up to 15 million yuan ($2 million) for each vehicle-to-grid connection project.

No fatal injuries

China’s mix of state-owned and privately owned auto industry has a cost advantage over foreign rivals thanks to government subsidies and domestic advantages in refining battery minerals, analysts say.

But China’s EV market, the world’s largest, is highly competitive and companies are also pursuing innovations that could help reduce costs.

The EU’s provisional tariffs are due to be applied by July 4, with the investigation continuing until November 2, at which point final tariffs, usually for five years, could be imposed.

As expected, shares in Chinese electric vehicle makers largely ignored the news, with Hong Kong-listed shares of BYD closing up 5.8%.

“The outcome of the EU tariff increases is slightly positive for BYD compared to our previous tariff forecast of 30 percent, improving BYD’s export growth outlook through the second and third quarters of 2024,” Citi said in a research note.

Geely Auto rose 1.7 percent and Great Wall Motor rose 2.7 percent, while Great Wall Motor’s Hong Kong shares fell 1.2 percent. In Shanghai, SAIC Motor fell 1.6 percent.

Joe Mazur, senior analyst at research consultancy Trivium China, said Chinese EV makers will be forced to pass on some of the rising costs to consumers.

“But this is by no means a fatal blow to China’s EV industry in Europe,” he said.

Tesla is expected to raise prices of its Model 3 due to import tariffs on Chinese-made EVs.

Chinese automakers have set export prices higher than they do in their home market, giving them some protection from tariffs. BYD, for example, prices its three main models at more than double, and sometimes nearly triple, the domestic Chinese prices.

There has been little support for the tariffs from within Europe’s auto industry, where automakers are facing an influx of low-cost electric vehicles from Chinese rivals.

Its biggest rivals include Europe’s largest automakers, such as BMW, Volkswagen, Stellantis and Mercedes-Benz.

German automakers in particular are heavily reliant on sales in China and fear retaliation from Beijing, while European automakers also import Chinese-made vehicles.

Shares in several major European automakers fell for a second straight day on Thursday amid fears of retaliatory measures from China.

Volvo Cars had the biggest fall, dropping more than 7 percent.

Fears of retaliation have spread beyond the auto industry, with shares in cognac maker Remy Cointreau also falling. The trade association for French cognac makers expressed deep concern about the EU tariff decision on Wednesday.

China launched an anti-dumping investigation into EU brandy imports in January, a move seen as a response to a widening trade dispute between Beijing and Brussels.

Global food companies, from dairy producers to pork exporters, are also growing wary of possible retaliation from China.

(1 dollar = 7.2515 Chinese yuan)

(Reporting by Beijing Newsroom, Zoe Zhang in Shanghai, Meimei Zhu and Eduardo Baptista in Beijing, Farah Masters and Donny Kwok in Hong Kong; Writing by Anne Marie Roantree and Josephine Mason; Editing by Stephen Coates, Miral Fahmy, Bernadette Baum, Christina Fincher and David Gregorio)



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