German Manager Magazine: BY, Geely, SAIC: EU introduces temporary punitive tariffs on electric cars from China003414

The provisional tariffs are the result of an investigation by the EU Commission. This showed that the entire value chain for electric cars in China is heavily subsidized and that imports of Chinese electric cars pose a clearly foreseeable and imminent threat of damage to the industry in the EU. According to Commission data, Chinese electric cars are typically around 20 percent cheaper than models manufactured in the EU.

Specifically, there is a provisional punitive tariff of 17.4 percent for the manufacturer BYD, 19.9 percent for Geely and 37.6 percent for SAIC. Geely produces, among other things, the electric Smart models #1 and #3 as well as the Volvo EX30. SAIC is building the in Germany popular MG4, which came in second place among electric cars in the registration statistics from Flensburg in May, just behind the VW ID.3. 20.8 percent is planned for other manufacturers, and companies that did not cooperate with the investigation would face a punitive tariff of 37.6 percent.

The final introduction of the punitive tariffs should take place within four months if China does not make any surprise concessions. Until then, the customs duties do not have to be paid, but only security deposits have to be deposited for them.

Be concerned about countermeasures

In Germany, the EU Commission’s actions are causing concern because there are fears of retaliatory measures that could particularly affect German car manufacturers. China is the largest car market in the world and, according to the Association of the Automotive Industry (VDA), was the third largest export market for cars from Germany in 2023 – after the USA and the United Kingdom. German companies could not only be affected by countermeasures, but also by the EU measures themselves – because some of them produce in China for export.

With a view to possible retaliatory measures by China, the Association of the Automotive Industry (VDA) recently warned that if China were to introduce import duties on vehicles with engines with a displacement of more than 2.5 liters, this would hit the industry hard. In 2023, around a third of the vehicles exported from Germany to China would be of this size.

Federal Economics Minister Robert Habeck (Greens) is also pushing for a political solution by November. He recently emphasized that Germany has no interest in “the fact that there is a race between tariffs and that the markets are fragmented as a result.” China, as an export country, is also not interested in this. In the past, however, French President Emmanuel Macron had generally expressed positive views on punitive measures against China’s electric cars.

According to a new study, the Kiel Institute for the World Economy (IfW) considers the planned tariffs on Chinese electric vehicles to be effective. According to a simulation calculation with the Austrian Institute for Economic Research (WIFO), the tariffs will reduce the export of Chinese battery vehicles to Europe by around 42 percent. In return, more electric cars that are manufactured in the EU or imported from third countries such as the USA or Turkey would be sold across Europe.

Negotiations between Brussels and Beijing are ongoing

There were recent discussions between, among others, Chinese Trade Minister Wang Wentao and EU Trade Commissioner Valdis Dombrovskis. However, it is completely unclear whether they will lead to a resolution of the trade conflict. The EU Commission repeatedly emphasizes that a negotiation result must eliminate the influence of harmful subsidies. Talks between Brussels and Beijing are set to continue in the coming weeks.

If the authority, led by Ursula von der Leyen, concludes that China is not moving sufficiently, it may submit a proposal to impose final punitive tariffs in the next four months. The EU states could only stop the proposed tariffs if a so-called qualified majority speaks out against the proposal.

Qualified majority usually means that at least 15 EU states must agree, which together make up at least 65 percent of the union’s total population. If there is no qualified majority for or against the proposal, the Commission can either adopt it or present a new, amended version.

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