On Wednesday, June 12, the European Commission announced that starting next month, a maximum tariff of 38.1% will be imposed on electric cars imported from China. The tariff rate, higher than expected, is likely to trigger a trade war between China and Europe.
The European Commission stated that following an anti-subsidy investigation on Chinese electric vehicles that began last year, it officially notified Chinese automakers such as BYD, Geely, and the owner of the MG brand, SAIC Group, that additional tariffs of 17% to 38% will be imposed on battery electric vehicles (BEVs) around July 4.
These tariffs will be levied on top of the existing 10% tariff on all Chinese electric cars, depending on the extent to which automakers comply with the EU’s investigation announced last year. SAIC Group, by not cooperating with the investigation, faces the highest tariff of 38.1%, with its MG brand dominating the lower end of the European electric car market.
Amid domestic price wars and a weak domestic demand backdrop, Chinese electric vehicle manufacturers have been more actively expanding into the European market. SAIC sold 242,900 vehicles in Europe last year, ranking first among Chinese car companies; SAIC also ranked first in European sales of Chinese new energy vehicles, with a total of 125,500 vehicles sold throughout the year.
The EU stated that the investigation showed that the electric vehicle supply chain in China “has received significant subsidies, and the import of Chinese electric vehicles poses an imminent and foreseeable threat of harm to the EU industry”.
A senior EU official was reported as saying that Chinese electric vehicles “enjoy subsidies from mines to EU ports” as Beijing has invested heavily in lithium mining, metal refining, steel production, battery and car manufacturing, and then ships them to Rotterdam or Hamburg.
While this investigation targets domestic Chinese electric vehicles, Western car manufacturers like Tesla, BMW, and Renault that are produced in China and exported to EU countries will also face higher costs.
According to Bloomberg, the advocacy group Transport & Environment stated that in 2023, nearly one-fifth of electric vehicles sold in the EU were manufactured in China. They predict this number to rise to 25% this year.
The Chinese government has threatened retaliation against EU agriculture and aviation products and has initiated investigations into certain types of European alcoholic beverages. They also signaled readiness to levy tariffs of up to 25% on imported high-displacement cars, affecting brands like Porsche, Mercedes-Benz, and BMW. In recent weeks, Chinese Minister of Commerce Wang Wentao and other officials have been lobbying across Europe, urging the EU to make concessions.
Valdis Dombrovskis, the EU Commission’s Vice President responsible for trade, stated on Wednesday: “Our goal is to restore a fair competitive environment, ensuring the European market remains open to electric car manufacturers from China, provided they adhere to globally agreed trade rules.”
He said, “These tariffs are based on clear evidence from our extensive investigation and fully respect WTO rules. We will now engage with Chinese authorities and all parties to conclude this investigation.”
The final tariff levels are expected to be approved in November this year.
The following are the additional tariffs and rates faced by various Chinese electric car companies, as compiled by Reuters based on data from the European Commission:
Tariff rate: 17.4%
Including:
– BYD Company Limited
– BYD Auto Industry Co., Ltd.
– Changsha BYD Auto Co., Ltd.
– Changsha Xingchao Auto Co., Ltd.
– Changzhou BYD Auto Co., Ltd.
– Fuzhou BYD Industry Co., Ltd.
– Hefei BYD Auto Co., Ltd.
– Jinan BYD Auto Co., Ltd.
(Tariff rates and companies for 20%, 38.1%, and 21% omitted for brevity.)
A senior EU Commission official stated, “Tesla was considered not representative and therefore not included in the sample.” They confirmed that Tesla is the only manufacturer applying for individual treatment.
The EU Commission stated that Tesla produces many cars in China, and the carmaker may receive a “separately calculated tariff rate” at a later stage upon “verified request”.