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EU to impose higher tariffs on Chinese EVs: will they have a real impact on manufacturers?

As part of its ongoing investigation, the European Commission has provisionally concluded that the battery electric vehicles (BEV) value chain in China benefits from unfair subsidisation, which is causing a threat of economic injury to EU BEV producers.

Consequently, the Commission has reached out to Chinese authorities to discuss these findings and explore possible ways to resolve the issues identified in a WTO-compatible manner.

In this context, the Commission has pre-disclosed the level of provisional countervailing duties it would impose on imports of battery electric vehicles from China. Should discussions with Chinese authorities not lead to an effective solution, these provisional countervailing duties would be introduced from 4 July by a guarantee (in the form to be decided by customs in each Member State). They would be collected only if and when definitive duties are imposed.

The individual duties the Commission would apply to the three sampled Chinese producers would be:

  • BYD: 17,4 per cent;
  • Geely: 20 per cent;
  • SAIC: 38,1 per cent.

Other BEV producers in China, which cooperated in the investigation but have not been sampled, would be subject to the following weighted average duty: 21 per cent. All other BEV producers in China which did not cooperate in the investigation would be subject to the following residual duty: 38,1 per cent. Following a substantiated request, one BEV producer in China – Tesla – may receive an individually calculated duty rate at the definitive stage.

However, these tariffs could have little impact on the profitability of manufacturers, warned leading research house, Rho Motion. Will Roberts, head of automotive research at Rho Motion, warned that Chinese EV makers could absorb up to a 30 per cent trade tariff and still maintain a profitability rate comparable to their domestic market.

“If provoked, the reaction and repercussions could lead to a trade war which would be devastating for a region that is still heavily dependent on Chinese-dominated supply chains in order to achieve its lofty climate goals,” said Mr Roberts.

The anti-subsidy investigation was launched by the Commission in October 2023, when the Commission’s president Ursula von der Leyen recognised the huge potential of the electric vehicle sector for “Europe’s future competitiveness and green industrial leadership.”

According to Rho Motion’s data, nearly half a million EVs imported from China were sold in the EU in 2023, accounting for almost one-third of all EV purchases. This demonstrates the strong reliance the EU has on China for vehicle production.

The EU’s decision follows the one adopted by the Biden Administration in the US which, earlier in May, drastically increased import tariffs on a wide range of goods from China, including EVs, lithium-ion batteries, solar cells, semiconductors and other critical materials.

In particular, the tariff rate on electric vehicles will increase from 25 per cent to 100 per cent in 2024. The White House noted that with extensive subsidies and non-market practices leading to substantial risks of overcapacity, China’s exports of EVs grew by 70 per cent from 2022 to 2023—jeopardising productive investments elsewhere.

“A 100 per cent tariff rate on EVs will protect American manufacturers from China’s unfair trade practices,” read a press statement.

“The true test from the announcement will be whether Beijing will retaliate in kind, or come to an amicable solution,” said Rho Motion’s Will Roberts. “Europe’s manufacturers still rely on the Chinese market, so declining profits from the East would only slow their ability to transition effectively.”

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