Europe finalizes tariffs on up to 45% of Chinese electric vehicles

European Union (EU) countries on October 4 voted to impose tariffs on imports of electric vehicles from China. The European Commission (EC), the body responsible for regulating trade on behalf of the 27 member states, welcomed the majority’s support for the plan.

Effective from October 31 unless China offers a solution to end the deadlock, the tax rates applied to Chinese electric vehicle manufacturers are 17% for BYD, 18.8% for Geely vehicles, respectively. and 35.3% with SAIC vehicles. Geely owns brands such as Polestar and Sweden’s Volvo, while SAIC owns Britain’s MG, one of Europe’s best-selling electric car brands.

Other electric vehicle manufacturers in China, including Western companies such as Volkswagen and BMW, will be subject to a 20.7% tariff. As for Tesla cars, the EC imposes a separate tax rate of 7.8%.

These new rates are imposed on top of the current tax rate of 10%. This means that in practice, some Chinese automakers will soon face total tariffs of over 45%.

Beijing objects to the voting results. “China resolutely opposes the EU’s unfair, non-compliant and unreasonable protection measures in this case, and resolutely opposes the EU’s imposition of anti-subsidy duties on Chinese electric vehicles.” , said a spokesman for the country’s Ministry of Commerce.

However, the EU and the Chinese government still have four weeks to negotiate to find an amicable solution before the end of October deadline. EC spokesman Olof Gill noted that any solution proposed by Beijing must is fully compliant with World Trade Organization (WTO) rules, overcomes “damaging subsidies” from China and must be “monitorable and enforceable”.

Germany – a country with a powerful auto industry – and Hungary voted against the tax plan on October 4. The German Automobile Industry Association (VDA) said the government sent the “right message” by voting against the move.

VDA President Hildegard Müller called the EC’s decision “a further step back from global cooperation”. She said negotiations with China need to continue and said “escalation must be prevented – ideally tariffs should be avoided so as not to fall into a trade conflict”.

Meanwhile, Hungarian prime minister Viktor Orbán warned that the EU risks starting an “economic cold war” with China and pledged to vote against the tax measures. “This is the worst thing that can happen to Europe. If it continues, the European economy will die,” he said.

According to the EC, the market share of electric vehicles made in China increased from 3.9% in 2020 to 25% in September 2023, partly due to “unfair price reductions” compared to the EU industry. Brussels accuses Chinese companies of selling cheaply thanks to subsidies throughout the production chain.

These subsidies include local governments providing cheap land to build factories, below-market sources of lithium and batteries from state-owned enterprises, and tax and financial incentives from state-owned banks.

Rapid market share growth raises concerns that “made in China” electric vehicles threaten the EU’s ability to produce green technology as well as the jobs of 2.5 million auto industry workers and 10.3 million people. Others have jobs that depend indirectly on electric vehicle production.