The battle for sales markets for electric cars continues to escalate. After the USA, the EU could now also introduce punitive tariffs on Chinese electric cars. German companies in particular could suffer as a result.
The EU Commission is threatening to impose high, provisional punitive tariffs on electric cars from China. The authority announced this. Whether the tariffs of up to 38.1 percent actually have to be paid depends on whether another solution can be found with China. They would then be withheld retroactively from July 4 if the EU agrees to impose higher tariffs in the long term.
Since last autumn, the EU Commission has been investigating whether electric cars in China are benefiting from subsidies that distort competition. According to the Commission, Chinese electric cars are usually around 20 percent cheaper than models manufactured in the EU. EU Commission President Ursula von der Leyen said when announcing the investigation: “The price of these cars is artificially depressed by huge state subsidies – this distorts our market.”
The Commission has now come to the preliminary conclusion that the value chain for battery-powered electric vehicles (BEVs) in China is benefiting from unfair subsidies. This could cause damage to manufacturers in the EU. The Commission is therefore now threatening tariffs of between 20 and almost 40 percent.
China’s Foreign Ministry criticized the investigation as protectionism. The EU is looking for an excuse to impose tariffs on imported cars from China, which violates international trade rules, said spokesman Lin Jian in Beijing. Ultimately, this will harm Europe’s own interests. The day before, Lin had already announced that China would not stand idly by and would protect its interests.
Measures against German car manufacturers could follow
China is the largest car market in the world and therefore extremely important for German car manufacturers – countermeasures would affect German car manufacturers. BMW, for example, exports the 4 Series and the 7 Series from the EU to China. The Munich-based company does not provide any information on volumes. Porsche would also be affected if China reacted with countermeasures. The huge country is one of the most important markets for Porsche and is served entirely from Europe. Audi also exports numerous vehicles to China. “We are expecting around 60,000 units by 2024,” the group said.
At Mercedes, around 30 percent of sales came from China last year. The Wolfsburg-based core brand VW even sold almost 50 percent of its cars there in 2023, but serves the market almost exclusively with local production. According to calculations by the management consultancy JSC Automotive Consulting, which regularly evaluates registration figures in China, only 0.6 percent of the vehicles sold there by the VW brand in 2023 were imported models. Audi came in at 9 percent, BMW at 13 percent and the Mercedes-Benz Group at 20 percent. At Porsche, the rate was 100 percent due to a lack of local production.
A bitter price war has been raging among electric car brands in the “Middle Kingdom” for some time. German brands want to take on competitors such as the US car manufacturer Tesla and Chinese brands such as BYD or Nio. BMW, Mercedes, VW and other companies could be the first target of possible Chinese countermeasures. On May 22, the Chinese Chamber of Commerce in Brussels warned of this possibility. “Insiders” informed them that China was considering imposing tariffs of 25 percent on imported vehicles with large engines, the chamber said in a statement on X.
BMW, VW and Co. also build in China for export
In contrast to German voices, French President Emmanuel Macron has in the past generally expressed positive views on punitive measures against China’s electric cars. At the beginning of May, for example, he said in an interview with “The Economist” that it could not be the case that European producers were disadvantaged by European aid rules and different tariffs compared to Chinese companies. Car experts such as Ferdinand Dudenhöffer see Macron’s stance as an attempt to protect French car manufacturers such as Renault and Peugeot. In addition, French car brands have little market share in China and, unlike the Germans, do little business there.
German companies could be affected not only by countermeasures, but also by the EU measures themselves – because they also produce in China for export. Mini, for example, builds the electric Cooper, which was launched on the global market in May, together with the Chinese car manufacturer Great Wall in China. In the VW Group, only the new Cupra Tavascan, which is due to be launched in the autumn, could be affected. It is the first and only model in the group to be built in China and exported to Europe. BMW imports the iX3 from China to the EU. Mercedes builds the Smart vehicles entirely in Xi’an, China, together with its major shareholder Geely and also exports them to Europe.
USA had proposed special tariffs
The EU’s move follows similar measures from the USA. In mid-April, the Americans imposed special tariffs on electric car imports, semiconductors, solar cells, cranes and other products from China. The United States also accuses Beijing of distorting competition through significant state subsidies. Cheap Chinese products are being deliberately directed to the USA and Europe. Beijing denies this and argues that the industries are driven by innovation and that China is thus contributing to the fight against climate change.
According to state media, China exported 1.2 million cars in 2023 – almost 78 percent more year-on-year. In Germany, according to data from the Federal Motor Transport Authority, the number of newly registered vehicles with Chinese origin rose by 47.6 percent in 2023 compared to the previous year. In terms of numbers, however, Chinese cars were far behind the competition from other countries with 33,699 units. However, China’s electric car giant BYD is currently expanding its transport routes to Europe and is building a factory in Hungary, which would also be a gateway to the EU market without the lengthy transfer across the sea.
Beijing launches anti-dumping investigation into imported chemicals
In principle, many business representatives fear that mutual punitive tariffs could escalate into a trade war. The Ministry of Commerce in Beijing recently launched an anti-dumping investigation into chemicals from the EU, the USA, Japan and Taiwan. If products are artificially made more expensive by high tariffs, trade is often no longer worthwhile. However, this does not only affect the companies directly affected by the tariffs. Such a situation can also have a negative impact on suppliers and logistics companies, for example.
Source: Stern
