The European Commission has rejected the Chinese electric vehicle manufacturer’s proposal for a minimum selling price of 30,000 euros (32,946 dollars) as part of an anti-subsidy investigation a month ago. The Chinese government hoped that this move would prevent the European Union from imposing tariffs on electric cars manufactured in China next month.
Starting from October 31st, the EU will impose tariffs on electric cars produced in China unless an agreement is reached between the two parties.
Due to the confidential nature of the discussions, the negotiation details and proposed suggestions have not been disclosed to the public. The EU’s rejection of the Chinese proposal is not only based on the proposed selling price but also concerns about the subsidies received by Chinese car manufacturers, which the EU believes distorts competition.
According to data from JATO Dynamics in 2023, the average cost of electric vehicles in China is less than half of that in Europe and the United States. Chinese car manufacturers benefit from a range of cost advantages including cheap raw materials and batteries sourced locally, as well as substantial subsidies from the Chinese government.
In the first half of 2023, the average retail price of Chinese electric cars in Europe was around 32,000 euros (approximately 35,000 dollars). In comparison, according to JATO data, the average retail price of pure electric cars in Europe was 66,000 euros. Most European car manufacturers are currently developing cheaper models (around 20,000 euros), but these are not expected to be available until 2025 at the earliest. Volkswagen aims to launch a 20,000 euro model in 2027.
Chinese car manufacturers such as SAIC Group and BYD have priced their electric cars slightly above 30,000 euros in Europe, much lower than their prices in the Chinese market. This price difference highlights the importance of the European market for these Chinese manufacturers and their ability to flexibly adjust pricing strategies.
BYD’s “Seagull” electric car, also known as “Dolphin Mini,” is a small electric vehicle expected to be launched in Europe next year at a price lower than 20,000 euros.
Last week, the EU stated that the time for negotiating offset tariffs is limited, and unless both parties reach an agreement on Plan B, tariffs of up to 45% will be imposed on Chinese-made electric cars starting from October 31st for a period of five years.
On Tuesday, in retaliation, China took temporary anti-dumping measures against imported cognac brandy from the EU, affecting French brands including Hennessy and Rémy Martin. Starting from Friday, China requires importers of European cognac brandy to pay a deposit to Chinese customs. In response, the European Commission announced on Tuesday that it would challenge China’s measures against EU cognac brandy at the World Trade Organization.
The Chinese Ministry of Commerce has stated that it is seeking to negotiate an alternative to tariffs involving some form of “flexible pricing commitment.”
The EU stated that it is prepared to reconsider other price commitments, including minimum prices and import quotas, as negotiations continue.
Sources indicate that the solution may involve calculating a minimum price for each car manufacturer individually or for each vehicle model based on the size and series of vehicles.
Sources also suggest that a minimum price of 35,000 to 40,000 euros may become a more favorable negotiation standard.