After more than a year of launching an anti-subsidy investigation, the European Union has finalized this week a significant increase in tariffs on imported electric vehicles from China. The negotiations between the EU and the Chinese Communist Party, spanning several months, have failed to resolve the escalating disagreements between the two parties.
The latest tariffs, which came into effect no later than October 31st, are expected to be in place for 5 years. In addition to the original 10% car import tariff, the newly imposed anti-subsidy tariffs range from 7.8% to 35.3%. Geely Automobile faces an 18.8% tariff, BYD at 17%, and SAIC at 35.3%.
The European Commission has calculated a 7.8% tariff rate specifically for Tesla, an American company producing electric vehicles in China. Other electric vehicle manufacturers in China, including Volkswagen and BMW, are subject to a 20.7% tariff.
The President of the European Commission, Ursula von der Leyen, initiated the anti-subsidy investigation into Chinese electric vehicles in September of last year, before formally launching it in October of the same year. According to regulations, any investigation should be completed within a maximum of 13 months after initiation.
After a detailed investigation, the EU concluded that companies producing electric vehicles in China have benefited from substantial support from the Chinese government, enabling them to undercut their European competitors in terms of pricing, thereby capturing a significant market share and threatening employment opportunities in Europe.
The EU Commission stated that the market share of electric vehicles manufactured in China in the European electric vehicle market surged from 3.9% in 2020 to 25% by September 2023.
The commission pointed out that Chinese companies have received subsidies throughout various stages of the production chain, ranging from cheap factory land provided by local governments, to below-market-price raw materials supplied by state-owned enterprises, and even tax breaks and low-interest financing from state-controlled banks.
China’s unfair practices in capturing the European market pose a “clear and imminent threat of foreseeable damage” to the EU industry and put at risk the jobs of 2.5 million automobile industry workers and indirectly 10.3 million reliant on the industry.
China’s subsidized dumping of solar panels in Europe has already dealt a blow to European manufacturers, and the EU aims to prevent a similar scenario in the automotive industry.
According to the Associated Press, Valdis Dombrovskis, the Vice President of the European Commission mentioned, “Following a rigorous investigation, we have implemented these appropriate and targeted measures for fair market behavior and the European industrial base.”
In May, the Biden administration raised tariffs on Chinese electric vehicles from 25% to 100%. At this level, the US tariffs almost block all imports of Chinese electric vehicles.
Less than a month after the US raised tariffs on Chinese electric vehicles to 100%, the EU announced in June that temporary tariffs would be imposed on imported Chinese electric vehicles starting in July, and finalized the ultimate tariffs after the anti-subsidy investigation.
EU officials are hoping to acquire reasonably priced electric vehicles from abroad to achieve their goal of reducing greenhouse gas emissions by 55% by 2030. However, European leaders are against unfair competition resulting from subsidies.
According to EU Commission survey data, Chinese electric vehicles received government support in the fiscal sector amounting to $66 billion in 2022.
Xu Zhen, a senior financial expert in China, told Epoch Times that despite the imposed tariffs by the EU, Chinese companies like BYD still enjoy around 25% profits due to their cost advantages.
Xu Zhen warned that the Chinese Communist Party, providing support behind the scenes, is not a typical political party, and the EU should clearly recognize its nature rather than appeasing it. “In fact, the CCP is using the electric vehicle industry as a ‘unrestricted warfare’ weapon against Europe, hoping to defeat the electric vehicle industry in Europe and America, just like it did with the European photovoltaic industry.”
Reuters reported that Italy and France, EU countries vying for investment from Chinese auto manufacturers, cautioned that a large influx of cheap Chinese electric vehicles could pose risks to European manufacturers.
Luca de Meo, CEO of French automaker Renault, cited by Reuters, stated that the EU’s tariffs on Chinese electric vehicles are in line with the rules set by the World Trade Organization, to which each member country is a signatory.
Chinese authorities strongly criticized the EU’s anti-subsidy investigation and higher tariffs. A spokesman for the Chinese Ministry of Commerce on Wednesday, October 30th, responded by stating that they “do not agree with or accept” the EU’s decision.
In retaliation, Beijing has initiated antidumping or anti-subsidy investigations on European exports of brandy, dairy products, and pork products. Following the EU member states voting to finalize the imposition of anti-subsidy tariffs on electric vehicles, China declared temporary tariffs of 30.6% to 39% on French and other European brandy this month.
Some Chinese automakers are considering building plants in Europe to manufacture vehicles and evade tariffs. BYD is constructing a plant in Hungary, while Chery will produce cars in Spain through a joint venture.
For the EU, if over 60% of the value of components is imported from taxed countries and the assembly’s added value does not exceed 25%, it is deemed to be circumventing tariffs.