EU funds 4 October 2024, 11:50am

EU imposes hefty tariffs on Chinese electric vehicle imports

Portfolio

Despite opposition from five countries, including Hungary and Germany, the European Union will impose additional duties of 15-38.5% on electric cars imported from China.

"Today, the European Commission's proposal to impose definitive countervailing duties on imports of battery electric vehicles (BEVs) from China has obtained the necessary support from EU Member States for the adoption of tariffs. This represents another step towards the conclusion of the Commission's anti-subsidy investigation," the EU executive said in a statement on Friday.

EU countries have approved tariffs (up to 38.5%) on unfairly subsidised Chinese electric cars, despite last-minute opposition from Germany. 10 countries voted in favour of the tariffs, 5 against and 12 abstained (which constitute a yes vote), the European Commission said. The tariffs are on top of the existing base level of 10 percent.

Hungary was one of the most vocal member states objecting to the additional tariffs.

A 'qualified majority' of 15 member states, representing 65% of the EU’s population, were required to vote against the tariffs to prevent them from being imposed for a five-year period.

As the proposal did not require consensus support, neither Hungary nor Germany was able to veto it. A blocking minority would have required at least 13 member states, with a population of at least 35% of the EU's total population.

The duties are to be collected because of distortive Chinese state subsidies. At the heart of the case is the fact that Beijing has given its carmakers such large incentives that it has even recouped their losses by allowing them to sell vehicles cheaper in Europe. This has given Chinese producers a significant market advantage, but in a way that is prohibited by the World Trade Organisation.

In addition to the onslaught of Chinese EVs, EU car manufacturers are concerned that the EU plans to phase out diesel and petrol cars by 2035, no new conventional fossil fuel-powered vehicles will be allowed to be sold from then onwards. The introduction of tariffs could therefore help to create a level playing field between EU and Chinese manufacturers and give companies such as Volkswagen and Stellantis time to adapt.

However, if these tariffs are imposed, there is a risk of a trade war between China, the world's second largest economy, and the European Union. Beijing has already made several threats to restrict imports of European products such as brandy, pork, dairy products and luxury cars in response.

Germany is under particular pressure on this issue, as luxury brands such as Porsche and Mercedes have a significant market share in China.

China has already targeted exports from the EU, such as cheese, pork and cars with large engines (such as Porsche, Mercedes and BMW) as part of the retaliatory measures.

Negotiations between Brussels and Beijing are continuing at the World Trade Organisation (WTO), and the European Commission has proposed that the dialogue should continue even after the tariffs are imposed.

"In parallel, the EU and China continue to work hard to explore an alternative solution that would have to be fully WTO-compatible, adequate in addressing the injurious subsidization established by the Commission's investigation, monitorable and enforceable," the EC said today.

A Commission Implementing Regulation including the definitive findings in the investigation must be published in the Official Journal by 30 October 2024, at the latest.