Following several months of anti-subsidy investigations, the European Commission notified automobile manufacturers on Wednesday, June 12th, that starting from next month, a maximum additional tariff of 38.1% will be imposed on imported Chinese electric vehicles.
Less than a month after Washington quadrupled tariffs on Chinese electric cars to 100%, Brussels stated that Byton (BYD) will face an additional 17.4% tariff, Geely 20%, and SAIC Group 38.1%. Brussels deemed these tariffs as a response to Chinese manufacturers accepting excessive government subsidies.
The three mentioned manufacturers have all undergone a sampling investigation by the European Union. The European Commission mentioned that companies failing to cooperate with the investigation will face an additional tax rate of 38.1%.
The Chinese Ministry of Commerce on Tuesday stated that the EU’s decision lacks facts and legal basis and is a form of “protectionist behavior.” They also mentioned closely monitoring the situation and “resolutely” taking all necessary measures to safeguard Chinese interests.
The temporary tariffs by the EU will take effect on July 4th, while the anti-subsidy investigation initiated in October last year will continue until November 2nd this year. The final tariffs, which typically last for a period of five years, may be determined at the conclusion of the investigation.
Based on trade data from 2023, with each additional 10% tariff on top of the existing 10%, EU importers of Chinese electric vehicles could face losses of around $1 billion, posing another blow to the electric vehicle industry in China already facing slowing domestic demand and falling prices.
Nevertheless, the EU’s tariffs will still be significantly lower than those of the United States. The Biden administration announced last month an increase in tariffs on Chinese electric cars from 25% to 100%.
Western manufacturers exporting cars from China to Europe such as Tesla and BMW are considered “cooperative” companies and will be subject to a 21% tax rate.
Vice President of the European Commission Margaritis Schinas stated at a press conference that cars made in China benefit from unfair subsidy standards, posing a threat to EU manufacturers.
She mentioned at the press conference, “On this basis, the Commission has been in contact with the Chinese authorities to discuss these investigation results and explore possible solutions to address the identified issues.”
Analysts had previously anticipated EU tariffs on Chinese electric cars falling between 10% to 25%.
Vice President and Trade Commissioner of the European Commission Valdis Dombrovskis stated in a statement, “When our partners break the rules, we will uphold our rights.”
“Today, our anti-subsidy investigation has reached a milestone,” he added. “This is based on compelling evidence from our extensive investigation and fully respects WTO rules.”
The introduction of these tariffs comes as European car manufacturers face the challenge of an influx of low-cost electric vehicles from China into the EU market.
Data from the non-governmental organization “Transport and Environment” indicates that in 2023, 19.5% of electric cars sold in Europe were manufactured in China, many of which were under Western car brands like Tesla, Dacia, or BMW.
Simultaneously, the organization estimates that Chinese brands like Byton and MG could reach up to an 11% market share this year.
Before making a decision, the European Commission faced strong lobbying efforts, with the Chinese government threatening retaliatory measures against the EU targeting agriculture or aviation. European car manufacturers also heightened warnings against this move, fearing they could become targets of retaliatory measures by the Chinese government.
The final tax rate for the anti-subsidy tax will be decided by a Council vote – only eligible majority member countries, at least 15 countries representing a total population of 65% or more, can prevent this decision.
According to CNBC, NIO responded to the EU’s statement by firmly committing to the electric vehicle market and “strongly opposing” the tariff hike.