The European Union has decided to impose substantial import duties on Chinese electric vehicles in an effort to balance a production system that, according to Brussels, is being unfairly supported by public subsidies from China. European Commission Vice President for Trade Valdis Dombrovskis emphasized that the goal is not to close the European market to Chinese electric vehicles but to ensure fair competition. In response, Beijing has accused the EU of protectionism, asserting that the EU has ignored both the facts and World Trade Organization (WTO) rules, and is intervening against an advantage gained by China through open competition.
Within the Union, however, there has been notable dissent. Berlin, in particular, has been exerting pressure on the European Commission to reconsider the severity of the crackdown, with Chancellor Olaf Scholz's spokesperson stating that additional obstacles in trade are unnecessary and calling for talks with China. Hungary also criticized the plan as being overly protectionistic, while Sweden has also voiced clear opposition. Conversely, Italy has welcomed the decision, with Minister of Business and Made in Italy Adolfo Urso applauding the measures as a means to protect European production and to strengthen the Italian automotive industry. On the other hand, Stellantis, a global automotive manufacturer, expressed its belief in free and fair competition in a global trading environment and opposed measures that contribute to market fragmentation.
The new EU duties will rise up to 38.1%, significantly higher than the current 10%, and they will apply variably to different manufacturers. For instance, customs duties on Chinese manufacturers such as Byd, Geely, and Saic will range from 17.4% to 38.1%. Companies that participated in the investigation, including some large European firms producing locally, will face an additional 21% duty, while those that did not cooperate will see the maximum increase of 38.1%. Tesla, the electric car manufacturer led by Elon Musk, has sought lower tariffs for its Shanghai production.
According to the European Commission, no critical issues have emerged that would undermine the robustness of the investigation launched last autumn, which it deems WTO-compliant. Dombrovskis warned that action was necessary in response to a surge in imports of heavily subsidized Chinese battery electric vehicles, which he claims distort the level playing field in the single market and globally, negatively impacting EU businesses. Formal discussions with Beijing are now expected, and the new tariffs are set to come into force at the beginning of July, finalized by November.
China's reaction to this move is under close observation, particularly considering its own recent investigation into alleged dumping of European brandy, notably from France. Despite this, France has been one of the staunchest supporters of increasing duties on Chinese electric vehicles. Currently, China imposes a 15% tariff on European vehicles. Meanwhile, the United States has significantly escalated its duties on Chinese electric vehicles from 25% to 100%. The EU Commission estimates that the market share of Chinese electric vehicles in the EU has expanded from 3.9% to 25% over the past three years, posing a potential risk to 2.5 million jobs in Europe and an additional 10.3 million jobs globally.
- The repercussions of this unprecedented tightening of customs duties on Chinese cars are expected to be significant. The new tariff cost, ranging between 17.4% and 38.1%, will likely lead to increased prices for consumers, which manufacturers might mitigate by either raising prices or reducing their profit margins. A March analysis by the NGO Transport & Environment suggested that raising EU customs duties to 25% would make mid-size sedans and SUVs produced in China more expensive than equivalent vehicles manufactured in the EU, or force Chinese automakers to accept lower profit margins. Regardless, competitive advantages for Chinese manufacturers will be reduced, although compact SUVs and larger vehicles might still be marginally cheaper.
- French markets, among others in the EU, may see a decline in the dominance of 'made in China' models as price increases and reduced competitiveness take effect. Chinese manufacturers are now faced with a strategic dilemma: to either absorb the additional costs through reduced profits or pass them on to consumers, which could lead to declining sales and market share.
